WarnerMedia Loses $1.2 Billion in Revenue Due to Investment in HBO Max
With the launch of HBO Max right around the corner, WarnerMedia has been withholding on licensing some of its content. Instead, they have turned inward, choosing to invest in original content and using library content such as “Friends” — whose steaming license to Netflix used to bring in millions of dollars — to lure in new subscribers.
However, the decision to focus on HBO Max has come at a steep price. The company reported that they lost $1.2 billion in revenue because they are no longer licensing their content. “Without the impact of foreign exchange pressures and HBO Max investments in the form of foregone WarnerMedia content licensing revenues, consolidated revenues would have increased in both the fourth quarter and the full year,” AT&T, the parent company of WarnerMedia, stated in their fourth quarter 2019 earnings report today.
The news comes as AT&T is preparing to launch HBO Max in May. Back in October, AT&T chairman and CEO Randall Stephenson revealed the company would be putting a lot of power behind HBO Max. “HBO Max will become the workhorse for our video product as we move into next year,” Stephenson said. “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,” mentioned that the “lion’s share of ads” will also be moving to HBO Max. WarnerMedia expects the new streaming service to hit 50 million subscribers within the next five years.
In December, Variety reported that AT&T is expecting to spend up to $2 billion on HBO Max in 2020 and investing an additional $1 billion in each of the following two years. This is before HBO Max even achieves profitability in 2025. The streaming service will be “the key aspect of the video strategy going forward,” stated AT&T chief financial officer John Stephens at the Wells Fargo TMT Summit.
HBO Max will cost $14.99 per month and will be available across mobile devices, tablets, streaming players, connected TVs, gaming consoles, and cable set-top boxes.