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Key Trends That Could Affect Time Warner's 1Q17 Earnings

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Part 6
Key Trends That Could Affect Time Warner's 1Q17 Earnings PART 6 OF 12

Why Time Warner Believes HBO Now Will Rise to the Occasion

HBO Now

HBO Now is increasingly growing in strategic importance for Time Warner (TWX). The company stated on its 2016 earnings call that HBO Now had crossed 2.0 million subscribers in the United States (SPY). HBO Now is also distributed by third-party digital distributors such as Amazon (AMZN).

The company also believes that its tie-ins with third-party distributors such as Amazon have accelerated HBO Now’s subscriber base. It also said that it plans to tie in with other third-party digital distributors in the near future to improve the reach of its HBO brand and give consumers the option to subscribe to HBO Now through multiple distributors.

Why Time Warner Believes HBO Now Will Rise to the Occasion

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There’s rising competition in the streaming services industry given the rise in new entrants. This competition could make it tough for direct-to-consumer services such as Time Warner’s (TWX) HBO Now to gain new subscribers.

Time Warner was asked at the Deutsche Bank Media, Internet and Telecom conference last month about whether it intended to change its pricing strategy for HBO Now. It said that considering the growth in subscription revenue for HBO, it didn’t believe the company would need to increase the price of HBO Now. The company also said that it was offering its viewers a vast array of programming at a price of $15.

Netflix’s pricing strategy

The cost of a Netflix (NFLX) subscription averages ~$10 per month. According to Netflix, its pricing strategy is to offer its subscribers a variety of price tiers so they can choose what tier they want. The streaming service offers more value at its higher-priced and middle tiers.

Netflix expects to increase its ASP (average selling price) over time and hopes to deliver more value to its subscribers for the price.

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