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State of the Screens

Will Advertisers Support An Ad-Supported HBO Max?

By June 10, 2021No Comments

Car on Road

Big news: HBO Max launched their ad-supported version of HBO Max with 35 brands pledging $80M  in ad commitments.

Big question #1: Why does HBO Max want ads?

Quick answer: Advertising will increase average revenue per user (ARPU) beyond the $15/month subscription.

Monthly pricing tiers for HBO Max:
1) Ad-free – $15
2) Ad-supported – $10 (33% discount)

HBO MAX Pricing Chart

Monthly pricing difference for ad-free vs. ad-supported according to Axios:
1) Hulu – $12 → $6 = 50%
2) Peacock – $10 → $5 = 50%
3) Paramount+ – $10 → $5 = 50%
4) Discovery+ – $7 → $5 = 40%
5) HBO Max – $15 → $10 = 33%

Select On-Demand Streaming Services

Big question #2: How many hours of HBO Max does an ad-supported user need to watch for a $15 ARPU?

Quick math on the advertising model for HBO Max:
1) Ad minutes/hour – 3
2) 30s spots/hour – 6
3) CPM $ – ≈ $80
4) $/spot – $0.08
5) Ad revenue/hour – $0.48
6) ARPU > $15 @ 15 hours ($10.00 + $7.20 = $17.20)

FYI: HBO Max viewers watch 84 hours per month (2.8 hours/day), meaning only 18% of watch time would need to be ad-supported to generate 15 hours of advertising.

HBO Max Reaches An Expanded Audience That Is younger and More Engaged

Hulu ARPU by subscription type according to PARQOR:
1) Ad-free – $12.00 ($12.00 + no ad $)
2) Ad-supported – $14.26 ($6.00 + $8.26 from ads)

Michael Beach

Michael Beach

Michael Beach is the Chief Executive Officer of Cross Screen Media, a media analytics and software company that enables marketers to plan, activate, and measure CTV and linear TV at the local level. Michael is also the founder and editor of State of the Screens, a weekly newsletter focused on video advertising that is a must-read for thought leaders in the advertising industry. He has appeared in such publications as PBS Frontline, The Wall Street Journal, The New York Times, Axios, CNBC and Bloomberg, and on NPR’s Planet Money podcast.

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