EXCLUSIVE: After corporate maneuvers, a global pandemic and labor unrest, the wheels of streaming commerce are finally starting to turn for Max.
The Warner Bros. Discovery streaming service introduced an ad tier in 2021, when it was known as HBO Max and owned by AT&T’s WarnerMedia, only to re-approach the ad business in earnest in early 2023. About a year into the effort and the rebrand to Max, there are clear signs of traction, with the service due to be center stage Wednesday at the company’s upfront presentation to ad buyers in New York.
“We’re total babies with this part of the business,” JB Perrette, CEO and President of Global Streaming and Games, enthused to Deadline in an interview. “But we’re finding that we’re very well-positioned in the marketplace when you look at streaming prices going up and consumer sensitivity to price.” Internationally, he noted, Max’s ad tier has reached more than 40 countries and will see a handful of crucial ones added to the roster over the next year when Sky distribution deals elapse in the UK, Italy and Germany.
Ryan Gould, Head of Digital Ad Sales for WBD, whose tenure at the company includes the period when HBO Max launched, said the advertising effort has “definitely come a long way.” What has remained consistent about it through all of its iterations, he said, is “the emphasis on really preserving an ultra-premium user experience with really unique ad executions … and understanding that the viability of the platform is really predicated on the cultural relevance and premium nature of the content.”
Noting that the service averages just four minutes of commercial time per hour, Perrette said, “There’s a reason we call it ad-lite.”
Asked about the current scale of the ad tier, Gould said there is “not a huge audience disparity on ad-lite versus ad-free. The audience is very similar. The median age for ad-lite is 39, one of the youngest in our portfolio.” About 40% of subscribers to the ad tier are classified as multicultural, he added, which is “a great complement to the rest of our portfolio.”
In its first-quarter earnings report last week, WBD said it had 99.6 million paying customers in streaming. It doesn’t break out Max subscribers from the total or disclose how many Max subscribers are on the ad-supported tier. But execs both on the earnings call and in interviews pointed to significant strides in the advertising streaming effort, especially as the film and TV lineup regains its footing after the dual strikes of 2023.
While total ad sales fell 7% in the quarter, the company said, direct-to-consumer revenue (including advertising) shot up 70% year-over-year. CFO Gunnar Wiedenfels said the DTC segment is “beginning to scale nicely,” in part due to ads. By the end of 2023, about half of all net new subscriptions were to the advertising tier.
When HBO Max rolled out ads about a year after its Covid-addled launch, it walled off HBO content from the effort, in part due to contractual obligations stemming from the original ad-free nature of HBO on cable. In the streaming era and since the close of the $43 billion WarnerMedia-Discovery merger in April 2022, that approach has changed, though HBO shows are still not interrupted by ads.
Jon Steinlauf, Chief U.S. Advertising Sales Officer at WBD, cites the premiere earlier this year of True Detective: Night Country as an example of the company’s strategy. The snowy series was shot in Iceland and set in Alaska, he noted.
“When we started to hear more about the storyline, ad sales goes to work and says, ‘What would thematically be something that would be fairly seamless and supportive, almost endemic to the series itself?’ And a rugged truck that’s really geared toward tough terrain was one of the early choices,” he recalled. “We created custom content that was in the look and the feel of the series itself. So you’re in an ad-supported household, you turn on Episode 1, you see before the program starts, you have a non-skippable 60 [second ad], it could be creative that we shot, next to one of their brand ads. And then there’s a message that speaks to people who have paid six, seven, eight dollars less to see ads. … ‘This episode is brought to you commercial-free by GMC Sierra.’”
Ads appearing next to HBO programming are “one of the biggest changes” of late, Gould said. The value of selectively trying to leverage the 50-year-old network’s brand, as Perrette sees it, is that “you don’t need to tell any marketer about the value of HBO.”
Warner Bros. Pictures, in keeping with the feature-film theme of upfront week, will also get major billing at the WBD presentation. Theatrical hits like Barbie and Wonka have been big subscriber draws for Max, whose ad-lite subscribers can see them after a pre-roll of ads.
What does talent make of this newly sponsored world? “They see it more and more as a partnership,” Perrette said.
The post Ads On HBO? Max Looks To Become Much More Than That As It Gains Commercial Traction appeared first on Deadline.
