AT&T’s WarnerMedia made its case to investors for a new video streaming service that will cost more than Disney’s and Apple’s upcoming products, as the Texas telecoms group fights to justify its expensive bet on entertainment.
The service, HBO Max, will launch in May and include shows and films such as Game of Thrones, Harry Potter and Friends for $15 a month. Wall Street analyst predictions had ranged from less than $10 to $17.
Three years after first agreeing an $80bn acquisition of Time Warner, AT&T executives are looking to convince investors of their high-stakes gamble on media, which has left the company saddled with a $160bn debt pile.
Pricing has been a central concern within WarnerMedia; senior executives have complained about charging a higher price for HBO Max than rival streaming services, according to people close to the situation.
But HBO already charges $15 a month for its own streaming service, which left WarnerMedia “boxed in”, said MoffettNathanson analysts. HBO Max will offer more than double the content for the same price.
the number of HBO Max subscribers globally that AT&T wants in five years for its new video streaming service
In comparison Netflix’s most popular plan costs $13 a month, while Hulu’s ad-free version is $12, Disney is $7 and Apple is only $5. Disney is also giving away Disney+, its upcoming service, to Verizon unlimited phone customers for free for a year. Apple is doing the same for anyone who buys an Apple device.
Speaking to investors at the Warner Bros studio lot in Burbank, California, where the Hollywood classic Casablanca was filmed, WarnerMedia executives attempted to justify the price of HBO Max by showcasing its rich catalogue.
With the Harry Potter, Lord of the Rings and Batman franchises, HBO’s hits such as Game of Thrones and Succession, as well as popular television shows such as Friends and South Park, WarnerMedia has an unrivalled catalogue.
The company is also investing in dozens of new shows to beef up its streaming service, including series from JJ Abrams and Ellen DeGeneres and HBO projects from Phoebe Waller-Bridge, Nicole Kidman and Jordan Peele.
But the streaming push is expensive. AT&T projects that HBO Max will lose $4bn over the next three years, before becoming profitable in 2025.
AT&T expects HBO Max to lure between 75m and 90m subscribers globally in five years. In comparison, Netflix already has more than 150m subscribers, while Disney expects to add 60m to 90m streaming subscribers in 5 years.
After years of denying the rise of internet TV, traditional media groups are racing to take on Netflix and other tech groups that have upended their business. AT&T this week revealed it had lost about 1.35m traditional TV customers in the third quarter, underscoring the urgency of the streaming plan.
The streaming wars have reached a fever pitch: on Friday Apple’s new video streaming service will launch, and a few weeks later Disney will start selling Disney+, while Comcast’s NBCUniversal is planning to unveil a service early next year.
Amid all these offerings, analysts expect that consumers will ultimately buy between three and five subscriptions.
AT&T was recently targeted by the activist hedge fund Elliott Management, which criticised its plans for the HBO Max service among other complaints. AT&T scrambled to put together an agreement with Elliott alongside earnings on Monday, to clear the way for its HBO Max presentation.
Per the truce, AT&T has committed to a portfolio review to sell up to $10bn in assets, two new board members and a wide-ranging search for a successor to chief executive Randall Stephenson.
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