Summary
- AT&T's HBO Max launch was far worse than its investors could have ever imagined and analysts have labeled it a failed opportunity.
- However, investors must acknowledge the fact that before HBO Max, AT&T already offered HBO Go and HBO Now.
- The failure to strike distribution deals with Amazon and Roku means millions of users are unable to view HBO Max on TV.
- AT&T has deep pockets and content is only a small part of its business. I expect the company to keep investing heavily in HBO Max, which would eventually yield subscription growth.
- I reiterate my buy rating on AT&T.
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Source: HBO Max
Investment Thesis
In my previous AT&T research note published on May 21, 2020, I mentioned that HBO Max could add $2 billion to AT&T's (T) top line within a year. However, the botched launch of the streaming service leaves the fulfillment of my estimate, shall we say, dubious. Now, we know that HBO Max is an upgrade on HBO Now, which means virtually all of Now's 30M+ subscribers transfer to HBO Max; however, low (~87,000) new app downloads on launch day certainly represents failure.
In today's article, I will share the app download activity since launch day and perform a guesstimate exercise to see if my HBO Max top-line growth is achievable.
What's HBO Max?
HBO Max is AT&T's newest streaming service. Simply put, HBO Max is HBO Now plus Max Originals plus the Warner Bros content library plus external titles like Friends, Big Bang Theory, etc.
HBO Max is filled with DC superheroes, hobbits, wizards, and Looney Tunes, but that was not enough to garner significant interest come launch day. AT&T's HBO Max launch can be considered a big fiasco if we believe the numbers provided by the app store intelligence firm Sensor Tower.
HBO Max Launch Was A Fiasco
WarnerMedia did not release any official numbers, but Sensor Tower said that HBO Max was downloaded by only ~87,000 new users across Google Play (GOOG) (GOOGL) and Apple’s (AAPL) App Store on its first day. Now, comparing to other streaming services like Disney+ (DIS) (4 million first-day installs) or Quibi (300,000 first-day installs), HBO Max's ~87,000 figure looks like a colossal failure. However, AT&T already had more than 30 million subscribers across its HBO Go and HBO Now streaming services, and thus the comparison to Disney+ and Quibi (completely new services) makes no sense.
However, AT&T's failure to strike a distribution deal with platforms like Amazon (AMZN) and Roku (ROKU) by launch day meant millions of potential subscribers could not access the new streaming service on their TV sets.
Furthermore, lots of HBO Now subscribers who were upgraded to HBO Max for free complained about technical difficulties in login and content search. When you open HBO Max, it feels like a hodgepodge of old shows and movies; however, HBO Max's content library is precious, and most of the reviews about content were positive.
