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HBO Max Ad Plan Could Pair Commercials With Movie Classics

HBO Max (terovesalainen - Adobe Stock)

You know what they say about WarnerMedia’s HBO: It’s not TV. In a few months, however, its streaming-video edition will start to run TV commercials.

In a marketing survey sent to consumers last week, WarnerMedia explained that an ad-supported version of its HBO Max streaming service could potentially carry just two to four minutes of advertising per viewing hour, a figure that would be less than the five minutes per hour that runs on NBCUniversal’s Peacock and the nine minutes per hour often utilized on Disney’s Hulu. And while commercials are not likely to appear in any original HBO programs, or the most recent movies playing on HBO, the survey suggests ads could surface alongside content from WarnerMedia’s other TV networks;  in original series that launch on HBO Max only; and in older films, which currently include classics shown commercial-free on the company’s Turner Classic Movies cable network.

WarnerMedia declined to make executives available for comment, and has yet to unveil firm plans for the ad-supported version of HBO Max, which is expected to debut next year. Subscribers who opt for an HBO Max “with ads” would pay a lower rate, the survey suggests, and the concept could allow consumers to watch HBO shows commercial-free for a price that is less than what they currently pay for the offering. These ideas are not guaranteed to be part of the eventual concept, and the company could specify different plans at a later date.

The survey’s details point to some of the somersaults AT&T must turn in order to bring advertising dollars to its streaming hub. Madison Avenue is eager to place money in Hollywood’s streaming wars, conscious that more consumers are making streaming part of their overall media diet. But WarnerMedia may not be immediately able to monetize some of HBO Max’s most popular programs with commercials.

HBO has firm contracts with both the cable and satellite operators that distribute its programming and many of the studios that supply it to keep its shows commercial-free for a predetermined “window” of time, according to three executives with knowledge of such agreements. That means advertisers on HBO Max will be barred from aligning themselves for the time being with popular series such as “Succession,” “Last Week Tonight With John Oliver” or “Lovecraft Country,” and will instead have to be content with HBO Max originals like “Love Life” or the sitcom “Friends.”

Advertiser interest in the possibility of aligning ads with HBO programs has been robust enough that WarnerMedia recently called several media buyers to reiterate that those shows will not be open for advertising when the ad-supported version of HBO Max debuts, according to one buying executive. Despite the guidance, media buyers continue to hope their clients will eventually gain access to HBO material.  One buying executive envisions WarnerMedia working in months to come to make older seasons of HBO programs available for commercials, as well as so-called “library content,” or older series. This concept, the buyer suggests, could keep current seasons of HBO series ad-free, while allowing the company to run commercials in programming no longer in a first-run window on the service.

Ads on HBO Max “would mostly be standard video commercials (like you would see on streaming services like Hulu) before, during and/or after shows and movies,” the marketing survey says, “along with some more innovative, interactive, and/or less disruptive types of ads.” Commercials will not appear “in around half of the movies on HBO Max, including the most recent/popular movies.”

AT&T has good reason to try and capture streaming-video ad dollars. Marketers are beginning to earmark greater levels of spending on venues like VIacomCBS’ Pluto, NBCUniveral’s Peacock and Walt Disney’s Hulu. In this year’s second quarter, spending on ad-supported streaming hubs  – much of it only a fraction of what gets placed on the TV networks – increased, according to the research firm MoffettNathanson. Ad spending on Pluto rose 60%, while advertising outlays at Roku rose 31.2% and spiked 12.2% at Hulu. Ad-supported streaming hubs “benefited from heightened usage and a mix shift in advertising budgets,” noted analyst Michael Nathanson in a late-August research note.

Meanwhile, he noted, ad spending at WarnerMedia’s Turner networks fell 45% in the same period.

While the HBO series remain off limits, WarnerMedia may grant advertisers access to a previously untouched frontier. HBO Max features a hub of films curated from the company’s Turner Classic Movies outlet, which has never run commercials.

Allowing access to some of Hollywood’s finest films –  Arthur Penn’s “Bonnie and Clyde” and Robert Altman’s “The Player” are among the selections that have been made available on HBO Max – could help offset business declines at TCM. Subscribers to the cable network are projected to fall 13.4% to 60.1 million by the end of 2020, according to Kagan, a market-research firm that is part of S&P Global Market Intelligence, compared with 69.4 million last year. Meanwhile, cash flow at the network is seen tumbling nearly 15.9% to $138 million in 2020, according to Kagan, compared with $164 million in 2019.

Keeping classic films ad free is tough. TCM’s one-time main competitor, American Movie Classics, started placing commercial “intermissions” in the films it showed in 2001. The network, now known as AMC and operated by AMC Networks, needed to generate more revenue as it sought to upgrade its programming lineup to include more recent films. People who want to watch TCM’s films without interruption would have to pay for the ad-free HBO Max, or, more simply, keep watching the movies on cable.

Variety's Brian Steinberg contributed to this post.

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