(Bloomberg) — After months of speculation over how much AT&T Inc. would charge for its new HBO Max streaming service, the company made perhaps the most obvious choice: the same price it already charges for HBO.
AT&T will offer the new platform for $14.99 a month, a level that seems in turns too high and too low. Even after spending hundreds of millions on the service — adding popular reruns like “Friends” and new shows from Conan O’Brien and Mindy Kaling to HBO hits such as “Game of Thrones” — the company didn’t think it could get consumers to cough up more.
On the other hand, at just under $15, HBO Max will be the priciest of the major streaming services. Netflix Inc.’s most popular tier is $13 a month. Walt Disney Co. is rolling out its new product next month for $7, and Apple Inc.’s TV+ will cost just $5.
AT&T faces a daunting challenge. The Dallas-based company expects to spend $4 billion on a service that won’t be profitable until 2025. And it has to keep both consumers and investors happy.
But the company thinks a trove of high-quality programming for adults and kids will prevail in the increasingly crowded industry. Launching in May 2020, HBO Max will offer 10,000 hours of content, AT&T said Tuesday in a briefing at Warner Bros., the Burbank, California, studio where “Casablanca” and “Friends” were filmed.
The service will include classic HBO shows, new programs, and a slate of acquired titles and content from the Warner library.
“In the era of Amazon, Apple, Google and Netflix, scale is no longer defined by distribution to a quarter of U.S. consumers,” said John Stankey, AT&T’s president and head of the company’s WarnerMedia division. “It’s a global game. HBO Max will have positive and immediate impact on stickiness of wireless, pay-TV and broadband” consumers.
As part of the briefing, HBO Max announced original series from Elizabeth Banks and Issa Rae, as well as a show by “Blade Runner” director Ridley Scott. The service also will be the exclusive streaming home for new and old episodes of “South Park,” one of the longest-running animated shows in history. AT&T is spending about $500 million for the rights.
AT&T is betting many of its 170 million phone, TV and broadband customers will be drawn to the huge library of films and TV shows in the $85 billion takeover of Time Warner. The phone giant expects HBO Max to reach 50 million domestic customers by 2025. Globally, the target is to sign as many as 90 million, with an early focus on Latin America and Europe.
HBO Max faces formidable rivals. Netflix has 160 million customers — a large advantage over all of the new entrants — and a particularly significant head start overseas. Hulu, where AT&T was once a minority owner, has more than 30 million U.S. customers in the U.S., and Amazon.com Inc. has tens of millions of viewers as well. The Disney+ and Apple TV+ streaming services launch in days.
Bob Greenblatt, WarnerMedia’s head of entertainment, acknowledged HBO Max won’t have as much content as some competitors. He stressed the importance of simplifying the search for shows and curating content, a dig at Netflix.
“We actually think our value proposition improves when we narrow the options, removing much of the filler no one watches anyway,” Greenblatt said.
AT&T chose the 96-year-old Warner Bros. studio to showcase HBO Max as one of its most important new initiatives, and highlight the strategy behind its multibillion-dollar foray into entertainment.
AT&T wants to use those assets, since rechristened WarnerMedia, to attract more wireless customers and convince existing ones not to switch providers.
HBO generates $2.5 billion in annual profit while setting the standard for high-quality scripted dramas, comedies and talk shows.
HBO Max will include all of the network’s biggest hits, such as “Game of Thrones,” “Veep” and “Last Week Tonight.”
It will also tap other WarnerMedia entertainment assets, including animated series at Cartoon Network and Adult Swim, documentaries from CNN, and movies at Warner Bros. The service will offer programming for kids and families, such as new episodes of “Sesame Street” and the film library of Japanese animation house Studio Ghibli.
WarnerMedia’s various divisions will increase their output of original programs to flood HBO Max with shows viewers can’t find anywhere else. AT&T has announced several new shows and movies aimed at women, including a competition series for florists and programs with Ellen DeGeneres, Melissa McCarthy and Nicole Kidman.
But the company has hurdles to overcome in a world where Netflix offers a taste of everything, according to Naveen Sarma, a senior director at S&P Global Ratings.
“HBO is a great brand, but it’s limited in its ability to reach a mass audience,” Sarma said. HBO is synonymous with sex and violence in a lot of viewers’ minds, and its audience skews older and male.
Hedge Fund Truce
Fresh from its truce with the hedge fund Elliott Management Corp., AT&T’s leadership sought to portray HBO Max as crucial part of the company’s future, an unstoppable, undeniable entertainment product that offers a little bit of everything for everyone. AT&T plans to invest as much as $2 billion on HBO Max next year.
Of the new players, Disney+ and Apple TV+ have some advantages. Disney+ is likely to be priced lower, and features Marvel and Pixar, two of the most successful entertainment studios in modern Hollywood. Apple TV+ will be free for a year to some 200 million people who buy one of the company’s devices.
Greenblatt said the company is ready.
“When you live in a world with dragons — like Netflix, Amazon and Apple — it feels very good to have one of your own in the game,” Greenblatt said. “Welcome to House AT&T, everyone.”
To contact the reporter on this story: Lucas Shaw in Los Angeles at [email protected]
To contact the editor responsible for this story: Nick Turner at [email protected]
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