AMZN Amazon.com Inc

By Joe Flint and Lillian Rizzo 

HBO Max was absent from the nation's two largest streaming players when it launched Wednesday, the result of increasingly frequent clashes between streaming services and distributors in an era where many actors are also direct competitors.

AT&T Inc.'s WarnerMedia unit has yet to reach a deal with Amazon.com Inc. and Roku Inc. -- which control 70% of the U.S. streaming-media player market, according to Parks Associates -- to make HBO Max available on hardware including Amazon's Fire TV Cube and Fire TV Stick as well as Roku-powered smart TVs and devices.

Amazon also has about 5 million customers who access HBO through its Prime Video Channels platform but aren't able to access HBO Max, despite the fact that the service was to be made available free of charge to all 33 million existing HBO subscribers in the U.S. starting Wednesday. Amazon Prime Video users who want HBO Max would have to drop HBO from Prime Video Channels and subscribe directly to the new service.

"AT&T is choosing to deny these loyal HBO customers access to the expanded catalog," Amazon said. "We believe that if you're paying for HBO, you're entitled to the new programming through the method you're already using. That's just good customer service and that's a priority for us."

A spokesman for AT&T's WarnerMedia unit said the company was looking forward "to reaching agreements with the few outstanding distribution partners left, including with Amazon and on par with how they provide customers access to Netflix, Disney+ and Hulu on Fire devices."

HBO Max also wasn't available to cable giant Comcast Corp.'s existing customers when it launched, but both companies reached an agreement Wednesday morning to give Xfinity cable and internet customers access to the new service.

Disputes between streaming services are getting increasingly frequent and complicated because of the changing power dynamics of the streaming era. HBO Max parent AT&T also owns pay-TV services including DirecTV and internet-based live-TV bundles; Amazon offers streaming devices and the Prime Video streaming service; so does Apple Inc. with Apple TV (the device) and Apple TV+ (the service); Comcast, whose Peacock streaming service will be available broadly this summer, is also the nation's largest cable operator with nearly 21 million video customers.

In many ways, such clashes are akin to the fights that traditional cable networks often have with cable and satellite operators. Walt Disney Co. and Amazon disagreed over terms regarding Disney+ only to reach an accord in time for that service's launch last November.

The latest entrant into the so-called streaming wars, HBO Max is entering a crowded battlefield and might face challenges gaining traction against more established platforms such as Netflix Inc., Disney+, which has gotten off to a strong start, and Amazon's own Prime Video. In July, Comcast, will roll out Peacock to the nation.

The service, which includes new original programming as well as all of HBO's content and old TV shows and movies from the Warner Bros. library and elsewhere, costs $14.99 a month, making it more expensive than practically all of its competitors. It does have a vast library of classic movies as well as plenty of animation and children's content.

At the center of the dispute between Amazon and WarnerMedia is that WarnerMedia wants Amazon to shuttle subscribers to the HBO Max platform as it does with Netflix and Disney+ customers. Amazon wants to house the HBO Max content on Prime Videos Channels as it currently does with HBO.

Essentially, AT&T wants Amazon to serve as a toll road to HBO Max instead of providing housing for it. Such an arrangement would make it easier for AT&T to track consumption habits and other valuable data about its customers and establish a direct relationship.

The row with Roku, a connected-television platform that serves as a gateway to streaming services and powers many smart TVs, centers around more traditional issues -- revenue sharing and advertising, people familiar with the matter said.

Typically, Roku takes a cut of a service's subscription fees and gets to sell ads in return for distribution. There are disputes on both those fronts with HBO Max, which next year will introduce an ad-supported version of the platform.

Roku said it had 39.8 million active accounts at the end of the first quarter, a 38% increase from the same period last year. In 2019, just under 1 in 3 smart TVs sold in the U.S. were Roku TVs, Chief Executive Anthony Wood said in an earlier earnings call. Meanwhile, Amazon said it had more than 40 million Fire TV active users globally as of Dec. 31.

Roku controlled 38% of the U.S. streaming-player market as of the first quarter of this year, ahead of Amazon's 32%, Apple's 13% and 9% for Chromecast, a player made by Alphabet Inc.'s Google, according to Parks Associates, a research firm.

"As the No. 1 streaming platform in the U.S., we believe that HBO Max would benefit greatly from the scale and content marketing capabilities available with distribution on our platform. Unfortunately we haven't reached agreement yet with HBO Max," Roku said.

The standoff in negotiations between Comcast and HBO Max that was resolved Wednesday morning centered on increased pricing for the streaming version of the premium channel, according to people familiar with the matter.

Comcast was once one of HBO's biggest distributors with roughly 50% penetration, a person familiar with the matter said. Now, that number has dropped to less than 30% of Comcast customers that subscribe to the service, the person added.

HBO has around 33 million U.S. subscribers, a number that has been relatively flat in recent years, and is hoping to build on that with the broad array of content on HBO Max. Globally, HBO has 140 million subscribers, a number that also includes sister channel Cinemax. Disney+ recently said it reached 50 million global users in the few months since its launch. Netflix reported 182.9 million customers world-wide in the first quarter.

For Comcast and its Peacock streaming service, HBO Max now poses more of a threat as a competitor than just an add-on to the cable bundle.

In some cases, distributors have been able to leverage concessions from AT&T in return for agreeing to offer HBO Max. Charter Communications finally landed a carriage deal on AT&T's DirecTV for the Los Angeles Dodgers channel it distributes for the team in return for an HBO Max pact, people familiar with the situation said.

Other providers that have signed on to carry HBO Max include Altice USA Inc., Cox Communications Inc., and Verizon Communications' Fios TV.

Write to Joe Flint at joe.flint@wsj.com and Lillian Rizzo at Lillian.Rizzo@wsj.com

(END) Dow Jones Newswires

May 27, 2020 19:59 ET (23:59 GMT)

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