Yesterday, CNBC reported that HBO Max’s upcoming ad-supported tier will be priced at $9.99 per month, a $5 per month discount vs. $14.99 per month for its existing ad-free service. The $5 differential is mostly in line with the approach other subscription services with an ad-supported tier, such as Hulu, Peacock and Paramount+ have taken and is therefore unsurprising.

But there are still many interesting questions about the HBO Max ad-supported tier and how it will be positioned relative to the ad-free tier. One big one is which content will actually carry ads, and which won’t. At AT&T’s recent investor day, WarnerMedia CEO Jason Kilar said “We will not be having advertising inside the HBO original series.” Does “inside” mean that only mid-roll ads are off the table, but pre-rolls and post-rolls will be ok? Or does it mean no ads for HBO original series, period? If the latter, does it imply that Max originals are going to be the main content that will have ads?

If that’s the case, the problem is that Max originals are still a small portion of what’s available in HBO Max and will be for some time. If there are no ads associated with HBO originals, then wouldn’t that make a lot of HBO Max’s viewing time unmonetizable with ads? I’m thinking of all the binging of “The Sopranos,” “Game of Thrones” and “The Wire” for instance. All of that would seemingly be ad-free, along with the Warner Brothers and other studios’ movies that also won’t have ads.

Subscribers may quickly realize the $9.99 per month plan is a real bargain, because only a relatively small portion of what they’re actually watching includes ads. That would be a problem for HBO Max because the whole presumption of the ad-supported tier is that it can be monetized as well or better than the current ad-free tier. But if viewership is skewed to ad-free content then there would potentially not be enough ad inventory being created. If there are inventory shortfalls, would WarnerMedia be tempted to increase ad loads? (what the ad loads are going to be is yet another question).

Obviously WarnerMedia has early data on what HBO Max subscribers are currently watching. But this will change over time especially depending on the original content plan. For example the Warner Brothers movies are getting day-and-date release on HBO Max this year, but not in 2022. This change alone would seem to imply a shift in HBO Max consumption to ad-free HBO original series.

An overarching question is how the distinctions between what’s ad-supported and what’s ad-free will be communicated to HBO Max subscribers? It’s not hard to envision subscriber confusion about why ads are seen with some shows but not others. HBO Max will need to be able to address all of this.

To be clear, I agree with WarnerMedia’s decision to create a lower-priced ad-supported tier (though whether $9.99 per month is low enough to be compelling is yet another question). On last week’s AT&T earnings call, I thought CEO John Stankey persuasively described the new tier’s role, especially for more budget-conscious or younger households: “Having that option to be at a lower price point allows somebody to stick with the service and we just think it's a really smart place to be for that segment of the market.” I have been a long-time proponent that Netflix launch a lower-priced ad-supported tier for similar reasons.

Still, there are lots of questions about how HBO Max will execute the ad-supported tier. With the launch coming soon, we’ll find out the answers shortly.