Perhaps the biggest question AT&T executives have to answer when it comes to its WarnerMedia division is whether or not its big HBO Max gamble for 2021 is working.
With Wonder Woman 1984, Godzilla vs Kong, Tom & Jerry, and Zack Snyder’s Justice League all premiering on HBO Max over the last several months, analysts and investors will want to see proof that it’s helping HBO Max grow.
Last quarter, HBO Max and HBO added a combined 2.7 million subscribers, AT&T reported Thursday morning. It’s unclear how many subscribers were activations compared to retail (customers who sought out the product and purchased an individual plan instead of upgrading for free) as AT&T is no longer separating the two categories. Combined, there were more than 44.2 million HBO Max and HBO subscribers in the United states, up from 41.5 million at the end of the previous quarter. It represents a total growth of more than 11 million HBO Max and HBO subscribers year over year.
A “make or break quarter” isn’t a mentality most experts subscribe to because a business plan is so much more than three months. In the eyes of speculators and the media, however, it was the quarter that WarnerMedia had to prove its big HBO Max move worked. Despite launching almost one year ago exactly, HBO Max hasn’t seen Disney’s wild success with Disney+.
It’s not difficult to assuage why. Disney+ had Baby Yoda and an adorable High School Musical spinoff in its first year; plus, big exclusive movies like Mulan and Hamilton. While HBO Max had The Flight Attendant in its first few months, it wasn’t until Wonder Woman 1984, Zack Snyder’s Justice League, and Godzilla vs Kong that HBO Max seemed to pick up steam. Still, a combined 2.7 million subscribers being added isn’t breaking any records.
Part of the reason may be that fans who signed up for HBO Max in December to watch Wonder Woman 1984 already had it when Godzilla vs Kong and Justice League debuted. One of Disney+’s biggest subscriber additions came with the debut of Hamilton. It enticed a whole new consumer base to sign up for Disney+. WarnerMedia’s big tentpole movies all drove conversation and commanded attention, but that consumer base has pretty big overlapping interests. While the films may have performed well, according to WarnerMedia, they’re not enticing those without HBO Max to sign up en masse.
While HBO Max may finally make more sense for some customers, there are still a litany of issues, including getting legacy HBO subscribers (those who use cable) to actually move over to HBO Max.
Now, this week in particular, the focus will be on HBO Max’s growth compared to Netflix’s own earnings report. We tend to love the drama that surrounds the colloquial “streaming wars.” There’s a reason war is in the phrase. It’s particularly easy this week to pit WarnerMedia against Netflix.
Except that’s not what’s happening. Nobody is winning because they’re playing two different games. Part of the reason Netflix had a bad quarter is because the company over performed in 2020. Netflix saw historic subscriber additions, didn’t run out of content while other competitors did, and managed to keep people stuck at home entertained week after week.
HBO Max, which launched in May, saw its subscription revenues grow $3.8 billion, which represents a 12.6% growth compared to last year. That’s largely because the company moved a number of highly anticipated titles to HBO Max and saw an influx in attention as a result. This comes after a much slower start. But even then, 2.7 million additions isn’t five or 10 million. While Netflix and HBO Max are both trying to add as many subscribers as possible, their situations are vastly different. HBO Max is still trying to find its subscriber base; Netflix is trying not to lose them.
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If WarnerMedia’s bet pays off, HBO Max will grow by double digits at minimum over the next year. If that happens for HBO Max, WarnerMedia is doing something right — but it also means that HBO Max hasn’t hit its saturation point. There’s still room to grow increasingly fast because HBO Max can attract tens of millions of subscribers. So, using Justice League, Godzilla vs Kong, Mortal Kombat, and The Matrix 4 become no-brainers. A Deloitte study published last week found that US households will have four streaming services on average. That means there’s an opportunity for HBO Max and Disney+ to scale pretty significantly over the next few years.
They already have powerful libraries (Star Wars, DC, Lord of the Rings, Marvel, HBO) and a plethora of titles. It’s not hard to see why they’d continue to grow, especially as new shows and films come out, and as WarnerMedia prepares to launch its cheaper, ad-supported version. It’s also true, however, that they’re trying to hit a point that Netflix already hit.
Netflix is already in most American households. The company isn’t losing a troublesome number of subscribers. Executives are already developing strategies for growing in areas they do see potential for growth; more local content in non-English speaking regions, more family oriented series and films, and amazing popular gaming licenses to tap into a global audience.
AT&T’s earnings reiterate that WarnerMedia’s plans for HBO Max are seemingly working; HBO Max is still growing. It’d be concerning if they weren’t. The fact that everything is likely going how WarnerMedia executives expected it to when offering exclusive, highly anticipated content is proof that streaming’s simple model (new titles leads to acquisition while a full library keeps them from canceling) is effective.
The big question is whether HBO Max is growing fast enough. There’s clearly still plenty of work to be done and subscribers to find. Moving massive films to HBO Max and losing out on a good portion of the potential theatrical revenue only works if the streaming service actually starts to generate more than a couple million subscribers a quarter. WarnerMedia wants HBO Max to hit between 67 and 70 million subscribers by the end of 2021. At this rate, we’ll see.
Julia Alexander is IGN’s top streaming editor. Have a story tip? DM her on Twitter @loudmouthjulia or request her Signal number by emailing firstname.lastname@example.org.