As AT&T Inc.'s WarnerMedia gears up for the worldwide rollout of its streaming service, HBO Max, analysts warned that in Europe, the company faces an uphill battle when it comes to pricing and customer acquisition.

Having launched in the U.S. in May 2020 to much confusion, the service will go live in Latin America in the coming months before existing HBO-branded streaming services in Europe are upgraded to HBO Max in the second half of the year.

HBO is available via direct and indirect offerings in the Nordics, Central Europe, the Baltics, Spain and Portugal. In these saturated and price-sensitive markets, the company could lose customers and money as it rolls out HBO Max, analysts said.

"WarnerMedia will have to make HBO Max cheap outside the U.S. and lose money," Peter Supino, a research analyst at Sanford C. Bernstein & Co., said of the company's possible international prospects.

In the U.S., HBO Max costs $14.99 per month, the same as its predecessor, HBO Now. But in Europe, where only the more basic HBO Go service is available, existing customers are paying far less. This means there is a large gap between what local customers are used to paying and what WarnerMedia eventually wants to charge them for HBO Max, analysts said.

Over time, WarnerMedia could raise the price of the service in the U.S. to match Netflix Inc.'s most expensive plan, which ranges from $14 to $21 in the regions it is targeting, according to Michail Chandakas, an analyst for Kagan, a media research group within S&P Global Market Intelligence. Incremental price hikes have become the norm in streaming, with companies justifying a surcharge through the addition of more content or local currency fluctuations.

HBO Go's price disparity is far larger by comparison, starting from as little as $5 in parts of Eastern Europe where incomes are on average lower and tripling to more than $16 in Denmark.

While it has a larger video library than HBO Go, HBO Max lacks the breadth of content that Netflix has due to licensing issues impacting some of WarnerMedia's legacy movies and a lack of original programming, Supino said. As such, HBO Max's film library is "not highly differentiated" from what is already available on HBO, he said. Overall, the service is estimated to have about 2,500 titles, roughly half the number available on Netflix, Chandakas said.

These content challenges put the onus on HBO Max originals as a "hook" for customers, according to Supino. But these originals are likely to be exported from the U.S. rather than made for a European audience. Investing in non-U.S. content now would by risky, Supino said.

HBO has cornered roughly 4% of the European streaming market with help from its external platform partners that offer its service on their pay TV and internet TV outlets, according to Chandakas. The larger goal is to ultimately convert existing HBO customers to HBO Max subscribers in the hopes of establishing a direct-to-consumer relationship that gives the company access to more user data. This includes payment, internet provider, email, and granular viewing information, all of which can also be used by parent AT&T to cross-sell its mobile and broadband services and encourage customer loyalty.

Despite having the luxury of an established base, HBO risks losing customers by aggressively pursuing a direct-to-consumer strategy in Eastern Europe, where video streaming uptake is lower compared to the rest of the region due to a lack of high-speed broadband availability, according to Tony Maroulis, principal analyst at Ampere Analysis.

Partly for this reason, HBO is not expected to give up its patchwork of distribution deals and partnerships that include European pay TV licensing agreements as well as pacts with local mobile and internet providers that offer HBO's premium channel and apps as part of their bundled entertainment packages, often at a discount, analysts said.

They include Comcast Corp.-owned Sky Ltd., provider of Western Europe's largest pay TV service; Vodafone Group PLC in Spain and Portugal; and Sweden-based network operator Telia Co. AB (publ) in the Baltics. HBO's licensing deal with Sky means it is unlikely to launch its new streaming service in key streaming markets including the U.K., Germany and Italy until the agreement expires in 2025, analysts said.