AT&T CFO: HBO Max Becoming ‘Top Two’ SVOD Competitor in Europe

HBO Max only began rolling out its subscription streaming video platform in Europe in September, with additional markets in Sweden, Denmark, Norway, Finland, Spain and Andorra launched last month. The venerable brand is apparently resonating with European consumers.

Speaking Nov. 18 at the Morgan Stanley European Technology, Media & Telecom Conference in Dallas, AT&T CFO Pascal Desroches said Max has generated so much interest that it now rates highly in a SVOD market that includes Netflix, Disney+ and Amazon Prime Video, among others. Desroches said that trends are in line with AT&T’s expectations.

AT&T CFO Pascal Desroches

“In fact, while it is still early, the initial data suggests that in most international markets Max is rising to become a top two direct-to-consumer provider in terms of subscribers and revenue,” Desroches said.

Given this, the executive said he feels good about Max’s global positioning and remains confident in its longer-term global expansion. AT&T now expects HBO and HBO Max to track between 120 million and 150 million subscribers worldwide by the end of 2025.

Strong numbers as AT&T attempts to finalize a minority ownership/majority control asset sale to WarnerMedia to Discovery Inc. Desroches said he continues to expect the transaction to close by mid-2022.

HBO, HBO Max Near 70M Global Subs, Despite Estimated 5M Sub Loss Due to Amazon Channels Exit

AT&T Oct. 21 announced that WarnerMedia’s branded HBO property had 69.4 million HBO Max and HBO combined subscribers globally at the end of the third  quarter (ended Sept. 30). That tally is up 12.5 million subs from the previous-year period of 56.9 million. Domestic subs topped 45.2 million, up 7.1 million, from 38.1 million a year ago.

Notably, AT&T said Max subs increased 1.9 million from the second quarter (ended June 30), but were offset by an estimated 5 million sub loss due to Max’s departure from the Amazon Channels platform affording Prime members direct access to third-party SVOD apps. AT&T made the decision to withdraw due to Amazon’s margins on Max subs, among other issues. Other high-profile SVOD exits from Amazon Channels include Netflix and Disney+.

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AT&T said the average revenue per HBO/HBO Max sub is $11.82 monthly, with total WarnerMedia revenue up 14.2% to $8.4 billion. Overall direct-to-consumer subscription revenue is up about 25%.

WarnerMedia assets include Warner Bros. Pictures, HBO and Turner.

“We continue to execute well in growing customer relationships, and we’re on track to meet our guidance for the year,” John Stankey, CEO of AT&T, said in a statement.

AT&T CFO: WarnerMedia Sale to Discovery Expected to Close First Half of 2022

AT&T’s WarnerMedia minority stake sale to Discovery remains on schedule to close in the first six months of 2022, according to AT&T CFO Pascal Desroches.

Speaking at the virtual Bank of America Media, Communications & Entertainment Conference, Desroches said the $43 billion deal affording Discovery operating control of Warner Bros. Pictures, HBO and Turner is in compliance with government rules surrounding antitrust issues, adding he saw no reason why the merger wouldn’t be approved.

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“We feel really good about the ability of this to be approved,” he said.

Pascal Desroches

After racking up $180 billion in debt acquiring assets, including Time Warner (now WarnerMedia) and DirecTV, AT&T has been selling off minority stakes (and operating control) in both companies and others in an effort to reduce debt, generate cash and focus on its legacy telecom business, in addition to broadband and 5G distribution.

The telecom is selling Vrio, the Latin American operating unit of DirecTV with more than 10 million subscribers, to a private Argentinian company. This week it announced a reported $50 million sale of tabloid channel TMZ to Fox Corp.

AT&T CEO John Stankey has also suggested a possible merger between DirecTV and Dish Network assets — a move the latter’s founder/chairman Charlie Ergen has been advocating for years.

DirecTV to Officially Switch to ‘DirecTV Stream’ Aug. 26 as Dish Merger Scuttlebutt Grows

Satellite TV operator DirecTV beginning Aug. 26 will officially switch its brand name to DirecTV Stream. The distributor, which AT&T sold a controlling minority stake of to private equity group TPG Capital earlier this year, is looking to capitalize on the streaming video phenomena birthed by Netflix, Amazon Prime Video and Hulu, and now driven as well by Disney+, HBO Max, Paramount+ and online TV.

“AT&T satellite, streaming or IP video customers will automatically keep their video service, any bundled wireless, Internet or HBO Max services, and associated discounts with no action needed,” Bill Morrow, CEO of DirecTV, said in a statement.

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The newly branded DirecTV Stream will become the single brand for video streaming services previously launched by AT&T, with the exception of HBO Max.

Regardless of the name change, media chatter about a merger between satellite operators Dish Network and DirecTV continues to gain steam. Dish Chairman Charlie Ergen contends that with AT&T unloading DirecTV to a private party, regulatory concerns about the two companies combining operations would appear to lessen.

“In terms of DirecTV and Dish, I mean obviously, I’ve said it the last year, I think that those two companies go together, that’s inevitable,” Ergen said on the most-recent fiscal call. “From a regulatory point of view, it is less objection to it because [of the] hundreds of billions of dollars of broadband deployment and continued competition from the programmers themselves in the marketplace.”

Both Dish and DirecTV have been hemorrhaging pay-TV subscribers for years as consumers migrate to over-the-top video alternatives. Dish saw its net sub base (including online platform Sling TV) dip below 10 million for the first time in the most recent quarter. AT&T pay-TV subs dropped 13% to 15.7 million.

“We’ll just have to wait and see whether there is a desire on their[TPG]  part to do that, but I think it’s a timing issue more than anything else,” Ergen said.

Sony Completes Acquisition of Crunchyroll

Sony Pictures Entertainment has completed its acquisition of AT&T’s Crunchyroll anime business through Funimation Global Group.

Funimation is a joint venture between SPE and Sony Music Entertainment (Japan)’s subsidiary Aniplex.

The agreement was first announced in December 2020.

Crunchyroll has a direct-to-consumer anime service with 5 million SVOD subscribers. It serves 120 million registered users across more than 200 countries and territories, offering AVOD, mobile games, manga, events merchandise and distribution.

The deal provides the opportunity for Crunchyroll and Funimation to broaden distribution for their content partners and expand fan-centric offerings for consumers, according to the joint announcement from SPE and AT&T.

“We are very excited to welcome Crunchyroll to the Sony Group,” Kenichiro Yoshida, chairman, president and CEO of Sony Group Corp., said in a statement. “Anime is a rapidly growing medium that enthralls and inspires emotion among audiences around the globe. The alignment of Crunchyroll and Funimation will enable us to get even closer to the creators and fans who are the heart of the anime community. We look forward to delivering even more outstanding entertainment that fills the world with emotion through anime.”

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“Crunchyroll adds tremendous value to Sony’s existing anime businesses, including Funimation and our terrific partners at Aniplex and Sony Music Entertainment Japan,” said Tony Vinciquerra, chairman and CEO of Sony Pictures Entertainment. “With Crunchyroll and Funimation, we are committed to creating the ultimate anime experience for fans and presenting a unique opportunity for our key partners, publishers, and the immensely talented creators to continue to deliver their masterful content to audiences around the world. With the addition of Crunchyroll, we have an unprecedented opportunity to serve anime fans like never before and deliver the anime experience across any platform they choose, from theatrical, events, home entertainment, games, streaming, linear TV — everywhere and every way fans want to experience their anime. Our goal is to create a unified anime subscription experience as soon as possible.”

The purchase price for the transaction is $1.175 billion, subject to customary working capital and other adjustments, and the proceeds were paid in cash at closing, according to the announcement. AT&T expects to use the proceeds from this transaction to help support its debt reduction efforts.

DirecTV Stream: Lipstick on Pay-TV Pig

AT&T’s pending launch of standalone “DirecTV Stream” as the new brand name for its declining satellite pay-TV businesses (i.e. DirecTV, AT&T TV, and U-verse) marks the telecom’s latest makeover in a disastrous M&A legacy.

Marketing the platform with 15.9 million combined subs as a gateway (i.e. Roku and Fire TV) to third-party subscription streaming platforms such as Netflix, Amazon Prime Video, Hulu and even HBO Max is neither original or transformative. It’s still essentially a pay-TV business that lost 473,000 subs in the most recent fiscal period — 2.3 million subs over the past year.

DirecTV Stream is a short-term fiscal generator.

AT&T, the most highly-indebted company in the U.S., in February sold a 30% stake in DirecTV to private equity group TPG for $1.8 billion, valuing the El Segundo, Calif.-based operator at $16.25 billion — just six years after acquiring the company for $50 billion ($66 billion including debt).

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DirecTV Stream, under the leadership of new CEO Bill Morrow, will be spun off with $6.2 billion in debt as AT&T continues to chip away at a debt load that topped more than $180 billion following the $85 billion Time Warner acquisition.

“Regardless of the stated value of the deal, we believe it should suffice to say that AT&T is getting $7.6 billion of cash up front … [and] keeping 70% of the common equity,” Phil Cusick, analyst with J.P. Morgan, wrote earlier this year in a note.

As the saying goes, “a bird in the hand is better than two in the bush.”

Maybe, but AT&T still has $150 billion in debt at a time when it is spending billions on 5G rollout. The telecom’s other spin-off of a minority fiscal stake but majority operational control in WarnerMedia to Discovery CEO David Zaslav for $43 billion, underscored the telecom’s failed attempt to vertically integrate content with distribution.

“The truth is, AT&T made a boneheaded decision and now they’re paying for it, but in corporate America, no one really pays for it, no one’s even allowed to say it, no one’s allowed to admit it,” Jim Cramer, the outspoken “Mad Money” host, said recently on his CNBC program.

The TV analyst said it could have understood companies like Apple, Alphabet (Google) or Facebook pulling the trigger on such an enormous acquisition.

“They’d never do something as stupid, but at least they’re sitting on mountains of cash,” Cramer said.

AT&T Closes DirecTV Spinoff, Video Services Branded DirecTV Stream

AT&T and TPG Capital have closed their transaction establishing a new company named DirecTV. The new company will own and operate the DirecTV, AT&T TV and U-verse video services previously owned and operated by AT&T.

The newly branded DirecTV Stream will become the single brand for video streaming services previously launched by AT&T, excluding HBO Max. The transition will happen later this month. As a part of the deal, AT&T satellite, streaming or IP video customers will automatically keep their video service, any bundled wireless, internet or HBO Max services, and associated discounts with no action needed.

Not included in the transaction are WarnerMedia’s HBO Max streaming platform and regional sports networks, both of which are part of the pending WarnerMedia-Discovery transaction; Vrio (AT&T’s Latin American video operations, which are being sold to Grupo Werthein); U-verse network assets; and AT&T’s Sky Mexico investment. DirecTV will continue to offer HBO Max to subscribers along with any bundled wireless or broadband services and associated customer discounts.

DirecTV had approximately 15.4 million premium video subscribers at the end of the second quarter of 2021.

AT&T contributed its U.S. video business unit to the new entity in exchange for preferred units as well as a 70% interest in the common units of DirecTV. TPG contributed approximately $1.8 billion in cash to DirecTV in exchange for preferred units and a 30% interest in common units of the new company.

The DirecTV board will include Bill Morrow, CEO of DirecTV, and voting board members Steve McGaw and Thaddeus Arroyo, appointed by AT&T; and David Trujillo and John Flynn, appointed by TPG.

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“This is a watershed moment for DirecTV as we return to a singular focus on providing a stellar video experience,” Morrow said in a statement. “Building on our recent momentum, we are well-positioned to bring unparalleled choice and value to all of our customers under one iconic brand, whether they beam it or stream it.”

At close, AT&T received $7.1 billion in cash ($7.6 billion net of approximately $470 million cash on hand) and transferred approximately $195 million of video business debt.

HBO and HBO Max Add 2.8 Million Combined Q2 Subs

AT&T July 22 announced that its WarnerMedia subscription streaming video service, HBO Max, and HBO pay-TV channel added 2.8 million combined subscribers in the second quarter (ended June 30).

The platforms ended the period with 47 million combined subs, a gain of 10.7 million subs over the past year, and 67.5 million globally, up 12 million.

WarnerMedia ended the quarter with more than 12 million standalone HBO Max subscribers in the United States and 31.5 million transitioned subs from HBO pay-TV. HBO ended the quarter with 32,000 U.S. pay-TV subs and 3.5 million commercial subs — the former reflecting increased migration of subscribers from linear TV to streaming.

The company’s 20.5 million international Max and HBO subs consist of domestic and international, and exclude free trials, basic and Cinemax subscribers.

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AT&T now expects to generate upwards of 73 million global HBO Max/HBO subscribers by the end of this year. Max launched nationwide May 27, 2020.

Subscription revenue increased 21.3% to $4 billion, primarily reflecting the 38.5% growth of direct-to-consumer Max and HBO subscription revenue following the launch of Max in the year-ago quarter.

“HBO Max had another strong quarter and is ahead of plan to be a leading direct-to-consumer streaming platform, with both subscriber- and ad-supported choices,” AT&T CEO John Stankey said in a statement.

Electronic Arts Buys Mobile Game Developer Playdemic From AT&T/Warner Bros. Games for $1.4 Billion

Electronic Arts, AT&T, and WarnerMedia June 23 announced the sale of Warner Bros. Games’ mobile-games centric developer Playdemic, Ltd., to EA for $1.4 billion in cash.

The transaction generates more cash for AT&T to pay down $160 billion in debt following the Time Warner acquisition, while enabling Warner Bros. Games to focus on in-house IP games.

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Founded in 2010, Playdemic is known for its popular Golf Clash that allows players to compete with each other around the world in real time. Golf Clash is one of the leading mobile games in the U.S. and U.K. and has more than 80 million downloads globally to date. The game has been honored with numerous industry awards, including winner of the BAFTA Games Mobile Game of the Year (2018), Mobile Games Awards Game of the Year (2018), PocketGamer.biz Game of the Year (2017) and The Independent Game Developers’ Association (TIGA) Awards Game of the Year (2017).

“We have enjoyed working with the talented team at Playdemic as they have grown Golf Clash beyond all expectations into a hit mobile game with tremendous longevity,” David Haddad, president of Warner Bros. Games, said in a statement. “While we have great respect for the Playdemic team, our decision to divest is a part of our overall strategy to build games based on Warner Bros. storied franchises.”

The acquisition of Playdemic is part of EA’s mobile growth strategy focused on delivering exciting new games for its network of nearly half a billion players around the world. Playdemic’s portfolio and creative talent will be a significant addition to EA’s mobile growth engine. The acquisition will add to EA’s mobile portfolio of more than 15 live services across fast-growing genres, including lifestyle, casual, sports, and mid-core games.

“We founded Playdemic with a focus on creating highly engaging and innovative game experiences,” Paul Gouge, CEO of Playdemic, said in a statement. “Our success with Golf Clash has proven our approach and demonstrated the ability of our incredibly talented teams to develop and operate best in class mobile games.”

The acquisition price is subject to customary adjustments, and will be paid in cash at closing and retained by AT&T. The transaction is subject to customary regulatory approvals. The remaining Warner Bros. Games portfolio is included in the recently announced WarnerMedia-Discovery transaction and will become part of the combined media and entertainment company after the expected close of that transaction.

HBO Max GM Andy Forssell: Nothing Changes for at Least a Year — Except Movie Distribution

On the heels of AT&T’s $43 billion spin-off of WarnerMedia in a merger with Discovery, and pending corporate name change, life for the brand’s flagship streaming video platform, HBO Max, continues unchanged.

That’s the message from Andy Forssell, former interim CEO of Hulu, who was tapped last year by former Hulu boss Jason Kilar to be EVP and GM of Max.

Speaking June 3 on the virtual Barclays Future of Media Conference, Forssell said the mission at the SVOD/AVOD Max remains to produce compelling content and grow standalone subscribers — the latter totaling 11.1 million subs over the service’s first year.

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HBO and HBO Max ended the most-recent fiscal period with 44 million combined subs.

“Our mission today is the same as it was a couple of weeks ago: Run the business,” Forssell said. “We’re at least a year away from anything happening [with the merger]. So, certainly big news and one that we pay attention to — but it doesn’t change what we do.”

With Discovery CEO David Zaslav tapped to run the renamed Warner Bros. Discovery company, leaving Kilar and Forssell’s roles going forward in question, Forssell made no mention of his job future.

“Eventually, we’ve got to figure out how do you combine [Max] with Discovery [and Discovery+ SVOD] and what does that mean,” he said. “But for the [Max] team, it seems quite a ways off because we’ve got to wait for the Department of Justice and that type of [regulatory approval] process to play out.”

In the meantime, Forssell said you should expect the company to continue to rejigger the theatrical window through 2022. WarnerMedia made industry shockwaves announcing it would release the Warner Bros.’ 2021 theatrical slate concurrently on Max for 31 days — after doing so with Wonder Woman 1984 on Christmas Day 2020.

That singular streaming strategy will be tweaked next year to re-embrace exhibitors, but the days of the traditional theatrical window are not likely returning, said the executive.

“You’re going to see in 2022 a lot of experimentation that’s going to be far more wide-ranging than it would have been without COVID,” Forssell said.

Specifically, the executive said studios would apply a mixture of PVOD/SVOD and theatrical distribution depending on the movie, current events and market conditions.

“We’ll see experimentation across the board,” Forssell said. “You’ll see everybody trying almost all [distribution] models next year.”

He said the simultaneous release of WW84 on Max saw two-third of the movie’s streaming audience also watch the entire first season of original series “The Flight Attendant” starring Kaley Cuoco.

Forssell said that the streaming audience for the second Warner movie release on Max, The Little Things, attracted a wider audience via Max than it would have strictly through theatrical.

“In other words, The Little Things really enjoyed the benefit of a huge wave of audience,” he said. “So we look at that very closely.”

Indeed, Max’s latest original series, “Mare of Easttown” starring Kate Winslet, has generated strong consumer responses on both on the service and linear television.

“It’s a record setter on Max,” Forssell said.

The executive thinks that as streaming access accelerates, transactional distribution of movies “probably drops” over time. He thinks that when combining SVOD with ad-supported VOD, the possibility of penetrating the equivalent 100 million households reached during pay-TV’s peak is not unreasonable.

“By the end of [next year], I think we’ll have a really clear signal on how does that evolution move,” Forssell said. “We believe there’s a place for theaters in the long term. Super important to us that something like that thrive and survive. But again consumers will tell us.”