Streaming Wars Give WarnerMedia Way to Pair HBO Movies With Ads (EXCLUSIVE)

WarnerMedia wants to give Madison Avenue something the advertising industry has long craved but could never have.

Movies on HBO have for decades run commercial free — and will continue to do so. On the streaming-video outlet HBO Max, however, WarnerMedia sees opportunities to give sponsors a new roost amid its library of motion pictures.

Advertisers can strike exclusive alliances with specific films or groups of movies on the ad-supported version of HBO Max, where they can buy a “brand block,” a new commercial concept that runs before a movie starts, then continues without any further commercial interruption. The ads allow WarnerMedia to sell the streaming service at a lower monthly price and give subscribers the chance to watch a broad array of films without too much distraction, says Julian Franco, senior vice president of product management at HBO Max, in an interview.

“It’s very simple math from our perspective. Don’t interrupt the story if you don’t have to,” he says. “If we can create meaningful products that will bring advertisers close to the content, customers will have an appreciation for that brand,” after being told that commercials make it possible to watch the movie without further disruption.

One of the main attractions of premium streaming outlets like Netflix and Amazon is the companies’ willingness to stream well-crafted series and movies like “Ozark” or “The Boys” without any commercials. Now some media companies want to break those rules: What if there were a way to run top streaming fare with some advertising alongside it? More than 40% of daily signups for HBO Max are on its ad-supported tier, according to WarnerMedia. The service costs $9.99 per month, compared with $14.99 a month for the ad-free version. State Farm, AT&T, Stellantis, Marriott, Volkswagen, Bank of America, Microsoft, Amazon, and Ally Bank are among the advertisers that have been spotted on the ad-supported tier.

WarnerMedia’s efforts to fit ads around movies on HBO Max could be pivotal as big media companies test new tactics in the industry’s so-called streaming wars. Walt Disney Co. announced last week that it intends to unveil an ad-supported version of Disney Plus later this year. That service also counts movies — including blockbusters from Marvel and Pixar — as one of its main attractions. All the companies are under new pressure from Wall Street to generate more subscribers, particularly as they spend billions on content to attract them.

“As HBO Max starts to sell advertising, you are starting to see that there are ways to have marketers underwrite content creation,” says Scott Schiller, a former NBCUniversal digital ad-sales executive who is now global chief commercial officer at Engine, a marketing consultant. In the past, he says, many streaming services went commercial-free to show a clear contrast with linear TV, which has allowed its commercial breaks to become stuffed with pitches. Now, as the economics of producing new content have become more challenging, he says,  “we are starting to see it balance out.”

While signature HBO series — think “Euphoria” or “Game of Thrones” — don’t carry advertising, WarnerMedia executives say few movies are off limits.

Advertisers might want to experiment with the “brand block” in front of films related to Christmas or Halloween, says Franco. The ads can run in front of a new series of Warner Bros. films that will bypass theatrical release and go “straight to streaming” says Ryan Gould, head of digital ad sales and client partnerships at WarnerMedia, as well as “catalog” movies.  Straight-to-streaming titles include a re-imagining of the classic film “Father of the Bride” starring Andy Garcia; Steven Soderbergh’s “Kimi,” already released; and “Moonshot,” a science-fiction romantic comedy starring Lara Condor and Cole Sprouse.

“We are in conversations to package those straight-to-streaming films up as an exclusive offer” says Gould. Ads can run for up to 90 seconds, the executives say.

Madison Avenue is watching WarnerMedia’s experiments with HBO Max advertising closely. Many streaming outlets have direct ties to already-established entertainment brands, but none of those are like HBO. “WarnerMedia has to be careful. The platform is called HBO Max. It has an HBO brand in the name,” says Mike Pirner, executive vice president of advanced media at MediaHub Worldwide, a media buying operation that is part of Interpublic Group. “You certainly don’t want to dilute that brand with an experience consumers don’t enjoy.”

WarnerMedia has proceeded cautiously. Executives have vowed not to run more than four minutes of ads per hour. The company tested “brand block” advertising on HBO Max originals for several months, with research showing the commercials got a 37% jump in unaided recall and a 21% lift in brand recognition, Eye tracking, or the study of how viewers watch what they see on a screen, showed that more than half of the audience fixated on “brand block” ad text on the screen during the commercials. Nearly three-quarters of people surveyed said they felt appreciation for the advertisers that helped them watch fewer ads in the program.

Other streamers have unleashed several different ad concepts, but HBO Max “maybe put the brakes on” its process, says Pirner, just “to make sure they grew the service and didn’t overload consumers with too much.”

Executives are bringing other ideas to market. Advertisers are being offered the chance to align their commercials with specific HBO Max original series in the hopes they will also help the streaming outlet promote the series elsewhere. “If there are partners that can do things that are interesting from a co-marketing and support perspective, we really want to look into that,” says Gould. Audience targeting, or using data to find specific kinds of consumers, is also available.

Even as WarnerMedia tweaks some of the old policies about HBO and advertising, executives say they won’t defy audience expectations about what should happen in an HBO experience. If viewers are overwhelmed with advertising on HBO Max, says Franco, they will cut short their time spent on the service, which will make it less appealing to potential sponsors. To make more subscribers and advertisers happy, HBO Max will have to keep the overall advertising to a minimum.

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Streaming Wars Give WarnerMedia Way to Pair HBO Movies With Ads (EXCLUSIVE)

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