AT&T rolled out the red carpet for investors Tuesday in true Hollywood fashion – with a flashy event at Warner Bros. Studio in Burbank, California, to unveil its HBO Max streaming service.
In a presentation resembling the upfronts, AT&T revealed that HBO Max will launch in the United States in May 2020 with 10,000 hours of streaming content. The service will aim to reach 75 million to 90 million global subscribers and $5 billion in revenue by 2025.
“We’re all in,” said John Stankey, AT&T’s president and chief operating officer and CEO of WarnerMedia. “We must now secure our path to the market for the next decade.”
After introducing its SVOD service in 2020, HBO Max will launch an ad-supported tier in 2021, which will leverage ad tech unit Xandr to monetize inventory and create new and engaging ad formats, Stankey said. After that the platform will roll out internationally, starting in Latin America and Europe.
“As ad dollars follow this shift in viewing, and we manage the downtrend on cable networks, we'll leverage Xandr to monetize increased digital AVOD inventory,” he said. “Programmatic and targeted advertising associated with high quality content is a winning combination.”
What to watch?
Until 2021, HBO Max will be available by subscription only, with premium content being the name of the game to get people to sign up. AT&T will invest $4 billion into the service over the next four years with no incremental revenue at launch.
HBO will be the content anchor for HBO Max, which will cost $14.99 per month and include movies from Warner Bros. and shows, sports and live news from Turner networks. HBO Max will be available to the 10 million HBO subscribers that are also AT&T customers on the launch date through an easy sign-up process, Stankey said.
“This alone will create word-of-mouth marketing, momentum and buzz right out of the gate,” he said.
On the TV front, HBO Max will stick to HBO’s successful strategy of producing a limited amount of high-quality original shows and leveraging the staying power of classics such as “The Sopranos.” The service will launch with 31 originals in its first year and a total of 88 shows when combined with existing HBO content.
“It’s never about the number of times at bat, but hitting a home run every time,” said Bob Greenblatt, chairman of WarnerMedia Entertainment and direct-to-consumer. “We think our value prop improves when we narrow the options.”
HBO also touts exclusive rights to longstanding hits such as “Friends,” “South Park” and “The Big Bang Theory,” which draw most of their viewing on streaming platforms. The service will also have exclusive rights to the DC Comics franchise to compete with Disney+, where Marvel titles will live.
Expanding the audience will be key for HBO Max, which intends to grow beyond its core adult demographic to appeal to viewers of all ages. HBO Max will heavily leverage the “Sesame Street” franchise to attract children and families while leaning on shows like “Gossip Girl” and reality TV to attract young adults.
“We’re bringing in audiences beyond the HBO core,” said Kevin Reilly, chief content officer at HBO Max.
AT&T will offer the footprint of consumer connections to scale HBO Max.
“High-quality content is not enough if you don’t have scale and reach,” Greenblatt said.
During roll-out, AT&T will bundle HBO Max with AT&T TV, its live OTT service, to juice the offer. It will also leverage its distribution footprint of 170 million consumer relationships across mobile, cable, broadband and retail to “aggressively market” HBO Max, Stankey said.
Long-term, HBO Max will play a key role in recapturing the subscribers AT&T is losing from its struggling pay TV business. AT&T reported earnings on Monday included 1.1 million subscriber losses at DirecTV in the quarter.
“HBO Max will have a positive and immediate impact on the stickiness of our wireless and pay TV broadband offerings,” Stankey said. “When we offer HBO to our premium wireless subscribers, it reduces churn.”
The success of HBO Max will be a critical proof point in AT&T’s overall strategy with WarnerMedia, which has recently come under criticism from activist investment firm Elliott Management for underdelivering on shareholder value.
AT&T, however, is convinced that HBO Max will be the driving force in allowing AT&T to establish direct customer relationships in “most US households,” Stankey said.
“Three pillars are required for success in streaming: content, technology platforms and marketing and distribution,” he said. “Only AT&T enters this space with solid footing in all three.”