HBO Max had a “flawless” launch in May, according to AT&T CEO John Stankey, who offered investors a few details about the streaming rollout during a conference call with Wall Street analysts on Thursday.
The call followed the release of the company’s second-quarter financial results, which saw the company exceed profit forecasts despite significant headwinds due to COVID-19.
About 4.1 million overall subscribers signed up for Max and regular HBO during the quarter, including about one million wholesale subscribers to AT&T, Stankey said. The company set an array of distribution deals with pay-TV providers and tech firms like Apple and Google, though it has not yet reached terms with Roku or Amazon Fire TV, which together reach about 80 million U.S. homes. With at least 10 million AT&T pay-TV subscribers also paying for HBO, the service began with a head start.
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“We effectively established a new distribution framework for WarnerMedia,” Stankey said, with HBO Max coming together “in a short timeframe, and we managed to get it all over the finish line in the middle of a pandemic.”
While executives offered few hard streaming numbers, they said HBO Max engagement has been 70% higher for that of HBO Now, the stand-alone streaming service launched in 2015. The full HBO offering, which is on HBO Now, is also the core of HBO Max, which also adds library offerings from Warner Bros and a range of other company brands.
Reaction to HBO Max has been notably less ebullient among many Wall Street analysts and pockets of existing or would-be customers. It also has seen turnover of launch programming, including the complete set of eight Harry Potter movies, whose availability turned out to be a three-month carve-out from an overall rights deal with NBCUniversal. Gone with the Wind, the 1939 film, stirred up bad reaction when it appeared on the service amid nationwide protests against racial injustice.
MoffettNathanson analyst Craig Moffett wrote Thursday in a note to clients that HBO Max “has gotten off to a rather inauspicious start.” On the plus side, he conceded, it “cleared the bar of growing nicely past the baseline of pre-launch ‘regular’ HBO subscriptions.”
Customers have complained of being confused by the multiple HBO-branded offerings, and HBO is sunsetting its authenticated HBO Go app in the name of brand coherence. It will continue offering HBO Now as an option, priced the same as HBO Max, for any purists uninterested in the extra ingredients in Max.
Stankey, a longtime AT&T veteran who became CEO just a few weeks ago, brought in Jason Kilar as WarnerMedia’s CEO in the spring. That move followed a series of restructuring efforts, which merged most of the historically disparate operations of HBO, Turner and Warner Bros.
Touching on a hot-button issue among movie fans, exhibitors and Hollywood execs, Stankey said it would “not be the case” that Christopher Nolan’s Tenet would stream on HBO Max before a theatrical run. Such a scenario has been floated among ticket-buyers and in the investor community. Lightshed Partners analyst Rich Greenfield proposed in a blog post this week that HBO Max premiere the film and use it as a “battering ram” to force Roku and Amazon to the bargaining table.
At $15 a month, HBO Max is at the high end of the streaming spectrum, competing with lower-priced new entrants from NBCUniversal, Disney and Apple, plus established players like Netflix and Amazon. Compared with previous streaming offerings from Time Warner and WarnerMedia, Stankey said, Max “appeals to a broader demographic with attractive and diverse content.”
For context, Disney reported having 54.5 million subscribers in multiple global territories as of early May and Netflix leads the pack with 193 million subscribers around the world. Peacock and Apple have yet to divulge numbers, only very general indications of viewer appetite for certain programming.
AT&T is “right on track” with estimates given to analysts last fall for subscribers, activations and revenue, Stankey said. The company is forecasting 50 million Max subscribers in the U.S. by 2025, with 75 million to 90 million globally.
The math of HBO Max is complex, given that many existing customers already have access to it at no additional cost, through either their subscriptions to HBO via a range of outlets or to AT&T. Stankey said the company has “work to do to educate” customers about the benefits of Max. The company said HBO had 36.3 million subscribers, including HBO Max, as of June 30, up 5% from the end of 2019.
With 15,000 hours of programming, HBO Max is a healthy-size service, but COVID-19 has hit its operations hard, wiping out the planned marquee launch title, a reunion of the cast of Friends. The six Max Originals launched when the service went live in May all ranked among the top 25 shows viewed on the platform, Stankey said, which he called an auspicious sign. In the corporate earnings report, AT&T said sales of Warner Bros TV shows to HBO Max helped offset pandemic-related stress on WarnerMedia during the quarter.
A distribution standoff with Amazon Fire TV is continuing, Stankey acknowledged, charging that the tech giant is treating HBO Max differently than it does other third-party services.
The cheaper, ad-supported version of HBO Max promised in 2019 remains in the works for a 2021 rollout, the CEO affirmed.
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