Broken in square HBOMAX projections and positive spin that AT&T T put on the launch of HBO Max does not reflect the reality as demage vontrol guru.. John T. Stankey, stated that, “HBO Max IS STRONG, on track to hit its targets and that the product was “flawless.” yet produced ZERO benefits to an embattled Telco.
The company knew this and lowballed expectations, but the results also reek of missed opportunities.
While the report touts that HBO Max gained 4.1 million subscribers in one month, it barely slowed the bleed experienced by the traditional HBO. Combined, the traditional HBO and HBO Max finished the quarter with 36.3 million U.S. subscribers, up only 1.7 million (4.9%) from the 34.6 million at the end of 2019. The 4.1 million new subscribers all but vanished by the decline in cable and satellite subscribers. Worse, operating revenue fell for the combined HBO by 3.2% for the six-month ending. While AT&T states that HBO Max is on track to have about 50 million U.S. subscribers by 2025, many of those will likely be traditional HBO subscribers who jump to HBO Max, so the net adds may be only 14 million subscribers or so from today’s 36.3 million.
Disney Plus gained 10 million subscribers in one day and 54.5 million subscribers in the first six months. That’s what success actually looks like.
HBO is a great brand built upon great premium content, but the launch stumbled badly due to an array of marketing missteps that violated core marketing principles.
The HBO Max launch had grossly inadequate distribution. I started my marketing career at General Mills GIS -0.6% where I often heard, “We don’t market to empty shelves.” That means you don’t spend a dollar on marketing until your product has ample distribution so that your customers can buy it. HBO Max is not available via Roku or Amazon AMZN +0.5% Fire which combined represent roughly 70% of U.S. streaming households, leaving HBO Max to scramble for the remaining 30%. As a guesstimate, had AT&T made the deal with these services, the 4.1 million HBO Max subscribers might have been as many as 13.7 million. The difference (9.6 million) may have generated an added $1.73 billion per year of which HBO would have taken a substantial cut from Roku and Amazon. Success and failure is not only measured by gains, but also by opportunity lost.
There are reasons why AT&T has not done the deal with Roku and Amazon Fire, mostly related to a dispute over money, pathways, and ownership of customer data. AT&T feels that other streaming services have gotten better deals. While they are probably right, being justified is sometimes deadly if it results in stalled negotiations in an environment where more accessible streaming services are expanding rapidly.
Unfortunately, AT&T can be stubborn when it comes to contract negotiations. Ask any Dodger fan, most of whom could not see the Dodgers play on local television because of a bitter, six-year plus contract battle between AT&T’s DirecTV unit and Spectrum, the local sports network. It took the U.S. Justice Department to resolve the dispute. HBO Max does not have that much time to waste because consumers may have little money left for a fourth or fifth streaming service.
HBO Max is way over-priced relative to streaming competition. RIP AT&T