AT&T Inc. has begun laying the foundation for Warner Media's new HBO Max streaming service through sizable investments in the fourth quarter of 2019, according to AT&T Senior Executive Vice President and CFO John Stephens.
Speaking Jan. 8 at the Citi 2020 Global TMT West Conference in Las Vegas, the CFO said holding back premium content for HBO Max's May launch amounted to "about a $500 million investment" from AT&T's operating income during the quarter ended Dec. 31, 2019.
Stephens had indicated in October 2019 that AT&T would allocate some $2 billion in incremental investment for new content and by foregoing content licensing revenue, as well as spending on operating expenses tied to the platform and consumer acquisition costs. That is on top of unit Warner Media's own spending on the subscription streaming service. HBO Max will carry a $14.99 monthly price tag, the same as premium network HBO (US).
The executive reiterated AT&T's full year 2020 financial guidance, which included expected adjusted earnings per share of $3.60 to $3.70 and stable adjusted EBITDA margins compared to 2019. AT&T is scheduled to report fourth quarter and full year 2019 results on Jan. 29.
In addition to HBO content, HBO Max will feature programming from Turner's basic-cable portfolio and theatrical and TV fare from Warner Bros. Entertainment Inc.'s expansive TV and movie archives, as well as dedicated original fare aimed at building the service's appeal to women and younger viewers.
The company hopes to have some 10 million AT&T-eligible customers able to "sign right into HBO Max" upon launch, Stephens said. He pointed to promotional deals between other wireless carriers and competing services such as The Walt Disney Co.'s Disney+ as a sign that such ties would help to boost the new streaming entry's numbers.
"The difference is, I have owners' economics, and I have the umbrella of ownership of both," Stephens said, noting that AT&T can pair the new streaming service with its own wireless business. "As we all know, owners' economics on these matters in our industry and in the business, in general, is really important."
Speaking on the same day at a different event, Andy Forssell, executive vice president and general manager of WarnerMedia's direct-to-consumer business, reiterated that the company's goal to have 50 million HBO Max subscribers by 2025. Beyond that, the service is targeting another 25 million to 40 million international subscribers over the same time frame.