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How HBO Max stacks up against Netflix and other streamers

Yahoo Finance's Alexis Christoforous and Brian Sozzi discuss the launch of HBO Max with Ark Invest analyst Nick Grous.

Video Transcript

- There is a new player in the streaming wars. HBO Max officially launches today with content aimed at taking on the big dogs, like Netflix, and now, Disney Plus. Here to talk about it is Nick Grous. He covers the streaming space at ARK Invest. Nick, glad you're here with us because this is starting to get a little confusing now.

Let's break down HBO Max. I'm wondering how it stacks up against the competition, especially when you consider its price point, which is more expensive than the rivals at $15 a month. How does the platform stack up?

NICK GROUS: This is a great offering from HBO. If you look at from an HBO Now perspective, and what HBO has been known for-- it's been known for quality. And now it's trying to offer something that can compete with Netflix on a quantity scale. They're going to have 10,000 hours of-- of content.

They're going to have shows like Friends and The Big Bang Theory, that are these water cooler shows that keep-- keep users coming back to the platform. So it does stack up well. A higher price point. But if you already had HBO Now or HBO, it's in that same realm. But the question is, will it bring in new users at that 15 point-- $15 price point.

BRIAN SOZZI: And AT&T-- they have put out a target-- aggressive target on HBO Max. 50 million subscribers by 2025. Do you think they have any shot at hitting that?

NICK GROUS: I do. And the reason I think this is because, again, when we-- when we talk about the streaming wars, we-- we typically like to talk about everyone going after Netflix. But we have to think of it in terms of these streaming platforms going after linear TV. And what we see with linear TV, especially now with the pandemic, is an acceleration of cord cutting.

So right now, there's about 86 million households. We think that's going to fall by almost 48%, by 2025, to around 44 million households. And that's going to be a huge boon to these streaming services like HBO. So it is-- it is in the possible-- it is a possibility that HBO gets 50 million.

But, you know, it is a high, lofty price target. You have to remember Netflix is only at 68 million households in the US. And they've been doing this for 10 plus years.

ALEXIS CHRISTOFOROUS: You know, Nick, AT&T said that it wants to unveil an ad supported version of HBO Max. I mean, that sort of sounds sacrilege when you think about everything HBO has stood for since it first launched, right? You know, no ads. Does that surprise you? Do you think that might turn off customers?

NICK GROUS: I think it's the smart move. I think if you're going after Netflix, you need to have a point where that you-- where you can bring on new users. And the ad supported tier is a very attractive offering, especially when you think about the quality content that HBO has. That's what they've been known for, whereas Netflix has been known for using other third party content.

But now you're kind of seeing this flippining happening, where HBO is now going after quantity. Netflix is going after quality with its own original shows. But I do think that ad supported tier is a very smart move by HBO, and one that could really drive users to their services.

BRIAN SOZZI: Nick, at $14.99, and assuming-- let's do assume. 50 million subscribers by 2025. Is-- is the HBO Max platform, in your opinion-- is it profitable?

NICK GROUS: We're not too focused on profitability at this point. Again, we have to be thinking about the long term, macro trend here. And that's getting away from linear TV. Users want a very simple solution. And that is streaming on demand. And these services, like Disney, HBO, and Netflix are in a land grab state.

So they will do what they need to do to grow their user bases to a point where then they will be able to be profitable. For HBO, that-- that may be 50. That may be higher. But again, it all determines on how much content they're going to spend. Are they going to bring it-- are they going to reel that in at a certain point? So it's hard to say today. But we're not too concerned about it.

BRIAN SOZZI: Nick, then, how-- just following up quickly. What is-- how do you measure success of HBO Max? If it's not profits, what's the success look like for this?

NICK GROUS: You know, it's-- it's hard to say today, right? What-- what I think we need to focus on, again, is this idea that HBO is trying to go after Netflix. This is their move. Is-- is it going to be successful if they do beat out Netflix? I don't think they'll ever get near the amount of subscribers that Netflix has on a global scale. But this is their play at that.

If they're able to scale to that 50 million pri-- or 50 million user base in the US, that's a substantial amount of people watching HBO's content. And that would definitely be success in my eyes, and especially, theirs, because that's their target. But again, I think we have to understand that HBO is now trying to turn its service from something you signed on for for your favorite show and then canceled-- like-- like a Westworld-- into something that you keep year round like a Netflix.

BRIAN SOZZI: All right. Let's leave it there, Nick Grous, analyst at ARK Invest. Appreciate the insights. And sign up for HBO Max.

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