HBO Max Is the Streaming Cornerstone of AT&T’s 3-Year Plan

CEO predicts the service will have 50 million subscribers in 5 years

Headshot of AT&T's Randall Stephenson
Randall Stephenson will remain AT&T's CEO for at least another year.
AT&T

AT&T intends for its upcoming streaming service HBO Max to serve as the cornerstone of the company’s streaming video strategy, but it isn’t giving up on satellite television yet.

During an investor call Monday morning, AT&T CEO Randall Stephenson said the company intends to “streamline” its product offerings in the satellite television and streaming television spaces. While Stephenson did not answer most of Adweek’s biggest questions about HBO Max ahead of investor day on Oct. 29, he emphasized that the streaming service, which is scheduled to premiere next spring, will serve as the foundation of AT&T’s streaming ambitions.

“We ultimately get down to two products: satellite and our streaming product, which will be premised on the HBO Max platform,” he said.

HBO Max will become “the workhorse” for the company’s “streamlined and simplified” video product going into 2020, according to Stephenson. The company’s video products will also get a standardized technical backend. More details about the service will be revealed during Tuesday’s investor event.

AT&T anticipates it will spend nearly $2 billion on HBO Max in 2020, and Stephenson said the company predicted that HBO Max will grow into a 50 million subscriber business within the next four to five years. Customers will eventually be able to get live television offerings through the service, and Stephenson emphasized that the product offering will stand out in a crowded streaming landscape.

“This is not Netflix,” Stephenson said. “This is not Disney. This is HBO Max, and it is going to have a very unique position in the marketplace.”

Stephenson downplayed significant losses on AT&T’s satellite television business and DirecTV, which lost more than 1.1 million customers in the quarter. Stephenson blamed several content blackouts, which led to “sizeable subscriber losses” for that part of the business, but DirecTV has consistently lost subscribers.

While Stephenson assured investors that the losses would be less significant next quarter and that the company’s traditional satellite television offering “is going to have a long life,” he also made no promises about keeping DirecTV in AT&T’s portfolio forever.

“We have no sacred cows, and we’re always open to making portfolio moves,” he said.

AT&T’s 2018 acquisition of WarnerMedia, then known as Time Warner, is expected to lead to additional business opportunities as the company continues to pay down debt and cut costs where appropriate, according to Stephenson. The company has plans to invest even more in HBO, and John Stephens, AT&T’s chief financial officer, said HBO Max and the company’s ad-tech vendor Xandr would help drive growth.

Last month, AT&T faced pressure from hedge fund Elliott Management over its sprawl into the media and entertainment business, which the activist investment firm said was leading to less-than-impressive share performance. To assuage investors, AT&T on Monday detailed a three-year plan for the company, which was largely centered on streamlining its businesses and improving its financial performance. The plan also stipulated that AT&T will not make any major acquisitions in the next three years, and underscored that two new directors will be added to the company’s board within the next 18 months.

Stephenson, who has been in his post for 11 years, will remain with the company for at least another year.

In a statement Monday, Elliott Management partner Jesse Cohn and associate portfolio manager Marc Steinberg said they were pleased with the three-year plan.

“We commend AT&T for the positive steps announced today, which will create substantial and enduring shareholder value at one of America’s greatest companies,” Cohn and Steinberg said. “We have worked closely and collaboratively with management and the board on the initiatives announced today. It is clear to us that AT&T is committed to and accountable for creating shareholder value over the near- and long-term.”

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