HBO Max Reveal Impresses Wall Street; AT&T’s John Stankey Talks “Hard Pivot”

HBO Max John Stankey
CEO of WarnerMedia John Stankey Presley Ann/WarnerMedia

Several Wall Street analysts offered upbeat reactions to WarnerMedia’s investor day and HBO Max reveal on the Warner Bros lot, helping push AT&T shares fractionally higher Wednesday.

AT&T COO John Stankey, meanwhile, sat down with CNBC for a lengthy interview with CNBC that may raise an eyebrow or two in WarnerMedia’s film and TV operations. He described the “hard pivot” still under way at the company and explained why the ad-supported version of HBO Max got so little mention during the two-and-a-half-hour event.

Investors initially cheered the developments at AT&T, sending shares up 2% in the opening minutes of trading, but the stock then drifted back down to close at $38.21, up just a fraction. The company announced at the Tuesday presentation that HBO Max will launch next May and retail for $15 a month. That cost of HBO Max puts it at the top of the streaming market, two and three times pricier than Disney+ and Apple TV+. But its 10,000 hours of content — and zero cost to existing AT&T pay-TV and HBO customers — give analysts hope for its prospects.

UBS analyst John Hodulik, who has a “buy” rating on AT&T, found the presentation compelling, though he still wonders how the company will make good on plans to add 16 million new subscribers by 2025. “It’s unclear if offering more content at the same price will be enough to expand the total HBO base,” he wrote in a note to clients, “especially against the backdrop of new lower price competitors coming to market.”

Cowen & Co.’s Colby Synesael, who maintains an “outperform” rating on AT&T, similarly has some unanswered questions. “We came away impressed with quality of the content,” he wrote in a note to clients, describing the 10,000 hours of programming “a dizzying amount of old and new content.” And yet, the five-year forecast of financials left him scratching his head in some places. He said he is “more skeptical of AT&T’s initial financial guidance, including its $5 billion 2025 revenue target, which we found difficult to back into.” Although AT&T on Monday articulated a strong three-year financial and strategic plan that encourages Synesael, “We see increasing execution risk in 2020.”

Stankey, meanwhile, described to CNBC’s David Faber the “hard pivot” he has overseen at WarnerMedia, initially as CEO and now as COO of AT&T. “We’ve made great progress,” he maintained, but conceded the road hasn’t been smooth. “It’s been moments of disruption and displacement and anxiety that have occurred. But we’re in a much better place right now than we were at the date of the transaction close,” in June 2018.

Faber asked Stankey why there wasn’t a bigger mention of the ad-supported version of HBO Max, which had been touted to advertisers at WarnerMedia’s May upfront and by AT&T CEO Randall Stephenson.

“The AVOD product right now is actually going through the development phase and the spec-ing of it,” he said. “So, when we’re ready and we’re comfortable that we have the right price and we have the right structure of it, we’ll communicate it. I think we’ve been a little criticized over the course of the last year as we’ve gone through those iterations and development cycles. People don’t think we’ve been really crisp in our messaging. I don’t think I want to make that mistake again.”

Asked about the meaning of wrapping the fabled Warner Bros water tower in the black and purple logo of HBO Max, Stankey said it is “not insignificant. It might be the first time that the three letters—HBO—have adorned the Warner Bros lot.”

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