After losing more than 1.35 million subscribers from its premium video services, AT&T is forecasting a turnaround from its new video play – HBO Max. The telco says it expects HBO Max to grab 50 million subscribers in the next five years, passing Hulu and Amazon to nestle firmly into the number two spot behind Netflix.
Chairman and CEO Randall Stephenson said Q3 would be the last significant quarter of losses for DirecTV, although there may be “a little more” in Q4. Subscriber retention “will be improved and get better as we move into next year,” he said during a call with analysts.
Stephenson said a “couple of significant” content blackouts contributed to losses, while also pointing to the telco’s continued push for a higher price-point customer.
HBO Max will be AT&T’s workhorse
AT&T will standardize all of its software video platforms in 2020, with HBO Max “becoming the workhorse” of its video offerings.
Stephenson said despite the increase in premium video offerings being rolled out in the US over the next year, he doesn’t see the competitive landscape as all that crowded.
“The field in which we intend to play is not that crowded,” he insisted.
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HBO Max is “a unique product. It’s not Netflix, not Disney,” he said. “This is HBO Max and it is going to have a very particular place in the market.”
AT&T’s video product get streamlined and simplified during 2020, he said, and subscriber numbers should improve as a result.
HBO, in terms of subscriber retention and limiting churn is the “most powerful video bundle we have,” he said. And its impact will be beyond its traditional pay-TV business.
HBO Max as a churn buster
There’s no doubt the demand for premium over-the-top content has continued to grow and, as Stephenson noted, that will continue as consumers get even more used to watching premium content on their terms.
The telco is hoping HBO Max will have the chops to serve as a churn buster for it across businesses.
“Bundling that with our mobile business and the impact on that, we believe, will be very, very powerful,” he said. “We are bullish on how HBO Max gets leveraged across the business.”
HBO Max will be previewed at an event Tuesday night in Los Angeles.
Pay-TV sub losses surpass Q2
Globally, SVOD subscriptions are expected to double by 2024, and their growth in the US has been explosive. In fact, Stephenson noted that the era of watching content when you wanted, where you wanted and on any device you chose caught the industry off guard, arriving “sooner than we or anyone else anticipated.”
AT&T isn’t alone.
Cord cutting continued apace at other services, too.
Comcast saw 220,000 subs walk away from its pay-TV service, Charter lost 77,000 and Verizon dropped 67,000. Other major Tier 1 pay-TV providers still to report: Dish Networks and Altice, as well as privately held Cox.
So far, industry losses in the quarter are more than 1.7 million.
That one reason AT&T — and others — have been aggressive in vertically integrating its content and distribution businesses.
Mobility, fiber and WarnerMedia are expected to be AT&T’s revenue engines for next three years, Stephenson said, while also not ruling out a sale of DirecTV. None of its other businesses, he said, are off the table as it looks to pay down its debt.