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Exclusive: AT&T, Roku near deal to bring HBO Max to users

The two sides are close to reaching a deal that would bring the blockbuster streaming service to Roku users for the first time.

The two sides are close to reaching a deal that would bring the blockbuster streaming service to Roku users for the first time.

(Image: AT&T WarnerMedia / Graphic: The Desk)
(Image: AT&T WarnerMedia / Graphic: The Desk)

AT&T and Roku are nearing a deal that would bring a native HBO Max app to the streaming platform’s 46 million users, according to an insider.

Executives at both companies have been holding daily discussions since AT&T announced it would bring HBO Max to Roku’s rival Amazon last week, the source said, adding that negotiators at Roku are hopeful they can announce a deal before the end of the holiday shopping season.

Launched to much fanfare in late May, AT&T trumpeted HBO Max as a next-generation streaming service that couples the premium cable network’s original shows and movies with an expansive amount of content from its own WarnerMedia library and other studios. But the service rolled out without an app available to users of Amazon or Roku’s streaming hardware, effectively locking out tens of millions of users who might have paid the $15 a month to access it.

At fault was an earlier agreement AT&T made with Roku and Amazon to distribute HBO subscriptions natively to users. Under the deal, AT&T allowed Amazon to collect a commission for every HBO subscription purchased through its Prime Video Channels service. A similar arrangement allowed Roku to earn a cut from each paid sign-up to HBO through its Roku Channel.

Both companies wanted to keep that existing deal in place and continue earning their commissions while also offering access to HBO Max. AT&T, on the other hand, wanted HBO Max subscribers to sign up directly through them.

Before HBO Max launched, AT&T offered Roku the option of selling native HBO subscriptions in a way that would give customers access to a Roku-native HBO Max app, but only if they agreed to reduce their commission, according to a source. The deal was similar to one made with Disney’s Hulu, which sells access to HBO Max to customers of its on-demand and live TV services. Roku turned down the offer. It isn’t clear if AT&T made the same or a similar offer to Amazon.

Roku and AT&T have largely resolved the issue involving native subscriptions and commissions, the same source said in an interview with The Desk this week. Now both sides are negotiating over terms that involve a future version of HBO Max that would be subsidized through commercial advertisements.

Roku requires ad-supported streaming services to set aside a limited amount of commercial inventory for its own revenue-generating advertisements. This condition initially prevented Comcast’s streaming service Peacock from being offered to users when it launched earlier this summer; both sides eventually reached a deal in September.

Now the same issue is keeping Roku and AT&T from sealing a deal, with both sides bargaining over how often Roku will be allowed to drop its own commercials in during ad breaks on HBO Max programs, the source said. Like Comcast, AT&T intends to keep commercial interruptions on the ad-supported version of HBO Max at a minimum, and the company is trying to figure out how much of its inventory to offer Roku.

Roku executives want to ensure the commercial terms are locked in before AT&T launches the ad-supported version of HBO Max next year, the source said. At the same time, officials at Roku have an accelerated interest in reaching an agreement after last week’s announcement by AT&T and Amazon.

In the meantime, some Roku users already have the ability to stream HBO Max content to their devices after a software update brought support for Apple’s Airplay 2 protocol to some newer Roku hardware. Though the Airplay situation was described as a “workaround” by tech blogs, AT&T signaled it fully supported the streaming of HBO Max to Roku hardware using Airplay and even published a step-by-step guide on how to do it.

But the workaround is still limiting because it requires Roku users to have a separate Apple computer or mobile device. Those without compatible Apple gadgets still can’t stream HBO Max content on their Roku hardware and are limited to a basic HBO app with less content than HBO Max for the same $15 a month.

It isn’t just Roku that’s under pressure to make a deal: The decision not to support Roku and Amazon hardware has been blamed for AT&T failing to meet internal subscriber goals for the streaming service.

As a network, HBO has more than 38 million paying subscribers, according to information released by AT&T at the end of September. Of those, more than 25 million have access to HBO Max through agreements between AT&T and the customer’s cable, satellite or streaming TV provider and another 3.7 million subscribe to HBO Max directly through AT&T. But out of the nearly 29 million customers who could be streaming HBO Max content, AT&T admits only around 9 million have actually “activated” an account on the app, meaning around 20 million subscribers who pay for HBO Max aren’t using it.

Last month, AT&T’s chief executive John Stankey put some of the blame on Roku and Amazon, accusing both companies of abusing their dominance in the streaming TV market when it came to negotiations over HBO Max.

“We should ask ourselves, is that friction somebody reeling feeling their oats and maybe having market power above and beyond what’s reasonable for innovators?” Stankey said at a tech conference.

Executives at Roku have been more reserved with their comments regarding the two companies’ ongoing negotiations.

“We generally don’t talk about where we’re at in deals, but we continue to talk to folks and our goal is to have all the content on [Roku],” Steve Louden, the company’s chief executive, said at media conference earlier this week. “We’re not always first, but we have a very good idea of what the market is and how much value we can create. We’ve got the biggest, most engaged user base…[and] hopefully we can get a done deal.”

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About the Author:

Matthew Keys

Matthew Keys is a nationally-recognized, award-winning journalist who has covered the business of media, technology, radio and television for more than 11 years. He is the publisher of The Desk and contributes to Know Techie, Digital Content Next and StreamTV Insider. He previously worked for Thomson Reuters, the Walt Disney Company, McNaughton Newspapers and Tribune Broadcasting.
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