HBO is reportedly proving to be a bit of a headache for AT&T when it comes to deciding on the pricing point for the upcoming WarnerMedia streaming service.
The news on this comes from a recent report out of The New York Times which credits "three people familiar with the company's digital strategy" for the information.
Although AT&T and WarnerMedia have remained somewhat secretive on the finer details of the new streaming service, HBO is understood to be one of the driving forces behind it.
Not too long ago, comments by the company suggested there will be a multi-tiered pricing strategy in effect which would look to offer consumers increased accessed at increasing pricing points.
However, a recent report undid that suggestion when more recent comments by WarnerMedia's CEO pointed to an updated strategy of one price point at launch.
That price was believed to be less than Netflix, but more than Disney+ and it is here where the HBO problem comes in.
HBO currently costs $15 per month for most subscribers and that price point is directly tied to contracts with other distributors.
More to the point, it is a higher price point that where AT&T and WarnerMedia want it to be.
One suggestion to the problem is that WarnerMedia could simply keep the price the same and then just bulk out the content on offer with everything else WarnerMedia-related. This would add far more value to the user side of the deal and avoid rising the price any further.
The issue, it will then be a service that's priced higher than Netflix, Disney+, Amazon Prime Video, and many of the other direct-to-consumer options. For example, Disney has already confirmed its streaming service will be priced at just $6.99 per month.
AT&T and WarnerMedia may argue their service offers more content than Disney's, but it remains to be seen if it offers enough content to remain competitively priced if it is priced at more than twice the price of Disney's.
If lowering the price, than this would create its own conflicts. On the one hand, there will be those contracts with providers which would take a hit. Likewise, it would seem unrealistic those paying directly for HBO would be happy to continue to pay that price for HBO alone.
Another suggestion in the report is that AT&T and WarnerMedia could simply drop the price of HBO in general. This would solve most of the issues with the new service but then it would be AT&T and WarnerMedia that takes the direct hit through a loss in revenue.
This would also come at a time when the company would also be taking a hit in revenue through the removal of content licensing.
AT&T and WarnerMedia are expected to end the usual act of allowing WarnerMedia content to be available through third-party providers as a means to add an element of exclusivity to the WarnerMedia service. This type of move is becoming commonplace among direct-to-consumer streaming services as each one looks to pad out its own service with additional reasons for subscribers to sign up, and remain signed up.
It is unclear if AT&T and WarnerMedia will be happy with losing out on that lucrative third-party provider revenue, while also taking a revenue drop with HBO directly. Although, at the moment it is equally unclear if there's an alternative solution.