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Analyst Says HBO Max Won’t Be as Monumental for AT&T as Company Expects

Stephanie Sengwe

During an earnings call back in October, AT&T CEO Randall Stephenson expressed the amount of faith the company was hinging on [HBO Max.]

“HBO Max will become the workhorse for our video product as we move into next year,” he stated. “All of the muscle and range of investment is going behind HBO Max.” The company, which made it clear that they are not beyond selling DirecTV as there are no “sacred cows,” also revealed that the “lion’s share of ads” would be moving to HBO Max.

In December, reports also came out stating the company is expecting to spend up to $2 billion on HBO Max in 2020 and invest an additional $1 billion in each of the following two years before the service even achieves profitability in 2025.

But according to Evercore ISI analyst Vijay Jayant, despite all the capital and marketing going toward the newly launched streaming service, HBO Max will still not be a game changer for AT&T. According to his analysis, HBO Max will not be as pivotal for AT&T as Disney+ was for Disney because, “content remains a relatively small portion of the AT&T business, not the core as it is with Disney, so we see little chance that investors will begin to look at AT&T on a sum-of-the-parts basis, valuing HBO Max on a per-subscriber basis, as with Disney and Disney+.”

Jayant also touched on the topic of HBO Max’s distribution snafus. Though the company has deals with Altice USA, Cox Communications, Microsoft Xbox, Samsung, Sony PlayStation, Verizon and the National Cable Television Cooperative, Charter, Hulu, YouTube TV, Apple TV and Comcast, they are still not available on Roku or Amazon — two of the biggest distributors in the industry.

Assessing AT&T’s strategy throughout the process, Jayant stated, “The difficulty in these negotiations came from [distributors’] pushback that, if AT&T was going to offer HBO Max, with roughly double the content of HBO, for $15 on a standalone basis (roughly equal to the typical price consumers pay for HBO if bought through a distributor), then that would devalue the HBO product they currently sell, and would justify a lower wholesale price for HBO, or at very least no incremental price for the HBO Max upgrade.”

Jayant also believes the dispute with Roku is over ad-revenue, but expects that to be resolved soon. “While HBO Max doesn’t currently have ads, AT&T does expect to launch an ad-supported version, likely next year, and Roku will want to benefit from that advertising revenue,” he stated. “We expect this dispute to eventually be resolved, since neither AT&T nor Roku benefits from not having HBO Max available on Roku devices.”

HBO Max launched May 27 with a price point of $15 a month, the same price as HBO and HBO Now. All AT&T, DirecTV and HBO Now customers have immediate access to the service. Others who get HBO through their cable company will have to wait until HBO Max makes new deals with their provider.

The streamer launched with 10,000 hours of programming featuring a boasting a robust library with content from HBO, DC, Sesame Workshop, Studio Ghibli, Cartoon Network, Adult Swim, CrunchyRoll and Turner Classic Movies. While fans were expecting to catch up “Friends,” “The Big Bang Theory” and “The Fresh Prince of Bel-Air,” the streamer surprised fans with all eight movies from the “Harry Potter” franchise at launch.

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