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One of the things that makes Netflix (NASDAQ: NFLX) appealing is its simplicity. It's pretty clear what you're getting with Netflix's three pricing tiers; the only differences are the resolution of the video stream and how many simultaneous streams are allowed. While some licensed content may come and go from month to month, it's a sure bet that Netflix's original productions will be available for streaming indefinitely.
AT&T's (NYSE: T) plans for its forthcoming WarnerMedia streaming service are a bit more confusing. First of all, it'll have three tiers of content. Second, management can't even agree over what content should be exclusive to the platform and what it will license to others. Both issues may confuse consumers, which could lead them to avoid WarnerMedia's service altogether.
Image source: HBO.
Three tiers of content
Last October, AT&T announced its plans to use the various assets of WarnerMedia to offer a three-tiered streaming service, with HBO as the cornerstone. In some cases, customers might need to subscribe to the most-expensive tier to gain access to the content they want.
That's in contrast to Disney's (NYSE: DIS) plan, which is to offer a discount for taking more than one of its three streaming services. Disney won't require customers to pay for content they don't want.
Adding to the confusion, HBO Now will remain a separate service, yet WarnerMedia's service will include HBO's content in one of its tiers. Furthermore, some content tiers will have ads while others won't.
All of this adds up to a product offering that lacks the simplicity of Netflix or the flexibility of Disney. With Netflix, everybody gets the same content. With Disney, consumers have more freedom to pick and choose what they want. With WarnerMedia, the bundle of content is confusing.
The company can't agree on content
Late last year, WarnerMedia agreed to license Friends on a non-exclusive basis to Netflix for 2019. Friends is arguably the most valuable content in WarnerMedia's back catalog.
When asked about it on AT&T's fourth-quarter earnings call, CEO Randall Stephenson stated that "exclusivity is probably not that critical on that type of content." Two weeks later, head of content Kevin Reilly said, "Sharing destination assets like that, it's not a good model to share. ... They should be exclusive to the service."
There's clearly some internal confusion and debate about which content should be exclusive to WarnerMedia's streaming service, and which content should be licensed to other platforms.