WarnerMedia's Tiered Streaming Plan Takes Shape

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AT&T CEO Randall Stephenson

Netflix and Hulu will be hardest hit if the AT&T-owned service follows Disney's lead and claws back franchise movies and TV shows as deals expire.

WarnerMedia's Nov. 29 reveal that its direct-to-consumer streaming service will feature three content tiers signals that it plans to take on more than just Netflix when the offering launches in late 2019. "It's all-out subscription video wars," says Peter Csathy, founder of advisory firm CREATV Media.

Netflix and Hulu will be hardest hit if WarnerMedia follows Disney's lead and claws back franchise movies and TV shows as deals expire. Friends fans panicked Dec. 3 after a Jan. 1 expiration date appeared on the series' Netflix page; although Netflix confirmed later that day that the Warner Bros. Television comedy would remain on the platform through 2019, it will be non-exclusive, also becoming available via the WarnerMedia service.

Fellow WBTV series ER, currently exclusive to Hulu, may also revert to WarnerMedia now that the company is eyeing a sale of its 10 percent share in the video streamer to finance its high-stakes streaming duel with Netflix, which also has been spending big to replace its licensed content.

"If Netflix loses Friends, Gilmore Girls and [other] WarnerMedia and Disney properties, you'll see a death by a thousand cuts," says Csathy, who also cites competition from Apple's upcoming video streaming service.

The cheapest tier of WarnerMedia's streaming service will focus on movies and offer films from the Criterion Collection, taking aim at networks like Starz. The second tier — likely to mirror Netflix's $8 to $14 monthly pricing — will have original content and tentpoles like Warners' Harry Potter franchise, which would make it competitive to Showtime and Disney+.

The third, and priciest, tier will bundle the first two with additional library fare, third-party licensed content and possibly even live sports. "This product has to be good enough," WarnerMedia CEO John Stankey told analysts after unveiling the plan.

The service could provide other types of flexibility. Wall Street watchers expect WarnerMedia to mine its Warner Bros., Turner and HBO vaults for movies, TV shows and animation to market its offerings to a range of consumers.

"AT&T has a diverse portfolio that can target economically sensitive customers and premium ones," Macquarie analyst Amy Yong wrote in a note. "Through a variety of bundles/price points, we believe it will become a leading streaming player." 

This story appears in the Dec. 5 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.