AT&T is using today’s investor day to provide updated growth expectations for HBO Max, now the primary driver of the company’s video strategy.
AT&T now expects between 120 million and 150 million worldwide HBO Max and HBO subscribers by the end of 2025, up from the 75-90 million projected in October 2019. In the nearer term, AT&T expects to end 2021 with between 67 million and 70 million subscribers worldwide, up from about 61 million at the end of 2020.
WarnerMedia CEO Jason Kilar said about half of the 150 million estimated subscribers would be from outside the U.S. – where about 25% of current HBO Max subscribers come in via AT&T – and that the projections do not include potential markets like the U.K., Germany, Italy and Australia.
AT&T also provided some clarity on its international expansion and advertising plans for HBO Max. The company expects to launch HBO Max in 60 markets outside the United States in 2021 (39 territories in Latin America and the Caribbean in late June and 21 territories in Europe in the second half of 2021). In June, AT&T plans to roll out the long-discussed ad-supported version of HBO Max in the U.S.
AT&T didn’t provide an exact price point for the ad-supported HBO Max but Kilar clarified some content questions. He said the primary difference is the ad-supported tier won’t include same-day streaming access to Warner Bros. 2021 films.
“Everything else will be the same,” he said, adding that HBO Max will not have advertising inside the HBO original series.
Kilar said that WarnerMedia will announce pricing for ad-supported HBO Max in the coming months. He added that he believes his company will be able to cover whatever price break it gives to consumers and that the AVOD HBO Max could end up being slightly accretive to AT&T’s overall economics.
AT&T expects HBO business unit revenues to more than double over the next five years and as HBO Max investment increases, the company expects peak dilution in 2022 and break even in 2025.
Kilar, during his prepared remarks, said AT&T believes HBO Max is currently the second biggest direct-to-consumer service in terms of generating revenue. He clarified that, based on engagement and usage on different HBO services, HBO Max accounts for most of revenue within the consolidated HBO business segment.
“I can say with confidence that the vast majority of revenues that you see combined between HBO Max and HBO, over the next five years, I believe what you’ll see is that the majority of those revenues will be HBO Max,” he said.
HBO Max toplined an early morning update for AT&T that also touched on the company’s fiber expansion, use of newly acquired C-Band spectrum and plans to alleviate debt.
AT&T is still on track to spinoff its U.S. linear video operations (DirecTV, AT&T TV and U-verse) in the second half of 2021. The company said the deal won’t materially impact 2021 guidance but it will allow for longer-term focus on other aspects of the business. The company said that includes WarnerMedia, which should benefit from HBO Max scaling, advertising improving and cost savings offsetting increased investments in HBO Max.