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AT&T calls launch of streamer HBO Max a success despite business challenges posed by COVID-19

A billboard touts HBO Max's offerings.
(HBO Max)

AT&T declared the launch of its new streaming service HBO Max a success despite the business obstacles posed by COVID-19.

AT&T Chief Executive John Stankey told financial analysts in a Thursday earnings call that the service is on track with the company’s targets for subscribers and revenue since being rolled out on May 27.

The company finished the second quarter with 36.3 million U.S. subscribers for HBO Max and HBO combined, up from 34.6 million at the end of 2019.

One month after launch, HBO Max said it had about 3 million retail subscribers. An additional 1.1 million HBO customers activated HBO Max accounts, bringing the total to 4.1 million subscribers.

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The Dallas-based telecommunications giant predicts that HBO Max will have 50 million customers in the U.S. by 2025.

“The platform performed superbly, activations were strong, the content is world class,” Stankey said.

HBO Max is AT&T’s entry into the burgeoning streaming market, putting it into competition with Netflix, which has 73 million U.S. subscribers, and Walt Disney Co.‘s new service, Disney+, which surpassed 50 million subscribers in May after being launched in November. NBCUniversal rolled out its streaming entry, Peacock, last week.

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AT&T still does not have a deal with two of the largest streaming distribution platforms — Roku and Amazon Fire TV — to carry HBO Max.

Customer engagement, the average number of weekly hours spent viewing HBO Max, is 70% higher than HBO Now, the streaming service that carries the premium cable channel’s films and programs, the company said.

The HBO Max strategy of providing a wider range of content than HBO — including programs aimed at children — is paying off in reaching a broader audience, Stankey said.

Stankey also noted that HBO Max was able to attract customers despite launching with a lower number of original series.

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The production shutdown caused by the coronavirus outbreak stalled WarnerMedia’s plans to have a robust slate of original programs to promote HBO Max. Streaming services have found that originals are a key tool in recruiting subscribers.

HBO Max offers six new series. Stankey said that number will rise to 21 by August.

“Getting our production back on line is critical to making our 2021 subscriber plan,” he said. “It’s going to take time to return to our February production levels.”

But the initial response to the original series was strong, Stankey said, as all ranked in the top 25 viewed series on HBO Max.

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Alejandro Rojas, director of applied analytics for the data measurement firm Parrot Analytics, believes the new service is off to a promising start.

“In this second quarter, our data showed demand for HBO Max outpacing Netflix,” Rojas said. “Going forward, HBO Max’s challenge is how to build up sustainable momentum. For that they will need to expand their content offering by executing flawlessly a sequential plan that not only attracts new subscribers but also retains the ones they already have.”

Stankey noted that the ability of HBO Max to attract customers even with a lack of original series demonstrated the appeal of the company’s library of TV shows and films, including the durable sitcom “Friends,” offered on the service.

With uncertainty over when movie theaters will reopen, Stankey said HBO Max does give WarnerMedia an option to put some of its planned theatrical releases on the streaming platform.

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But he believes major releases such as “Tenet” and the next Wonder Woman feature are best experienced in theaters and does not see them premiering on HBO Max.

“I’d be surprised if that would be the case,” Stankey said. “I can assure you on ‘Tenet’ that will not be the case.”

“Tenet,” a big-budget science fiction film from director Christopher Nolan, was previously intended for release on Aug. 12, after being pushed back from July 17. It would have been the first major studio film to hit theaters since cinemas shuttered in mid-March.

But the new date was scrapped as the coronavirus crisis continued to spread. Warner Bros. has not disclosed a new opening date for “Tenet.”

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The COVID-19 pandemic drove down revenue across all of AT&T’s businesses in the second quarter. WarnerMedia saw a 23% year-to-year drop in revenue to $6.8 billion as production of movies and TV programs was shut down and ad sales declined.

AT&T’s overall revenue fell 9% to $40.95 billion in the second quarter from the same period in 2019, while profit dropped to $1.23 billion, versus $3.71 billion a year earlier. The company faced continued declines in its DirectTV unit and its wireless business.

HBO Max is the first major initiative for WarnerMedia, which under its previous name, Time Warner, was acquired by AT&T for $85.4 billion in 2018.


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