Jason Kilar: ‘A Lot of Wind’ in HBO Max Sails as Streamer Eyes Live Sports, Global Expansion, AVOD

WarnerMedia CEO Jason Kilar said the average HBO Max subscriber spends two hours a day streaming content, engagement driven in part by Warner Bros. Pictures theatrical movies and HBO original series “The Nevers” and “Mare of Easttown,” among others.

Speaking May 13 at the MoffettNathanson Eighth Annual Media & Communications Summit, Kilar didn’t disclose many new details, such as the price point for the pending ad-supported Max, acting instead as cheerleader for WarnerMedia’s wide-ranging forays into streaming video distribution.

Kilar said that when dividing the total number of active subscribers on a given day by the number of hours that are consumed on a given day, the data revealed two hours.

“[The engagement] hours are truly remarkable, and certainly in excess of where I thought we would be,” he said. “And I’ve been in the middle of this [SVOD] rodeo for a fair bit, dating back to the first days of Hulu.”

Kilar cited the recent TCM Film Festival as an example of curated content, including “unexpected gems at just the right moment,” that he said resonated with both pay-TV and HBO Max subs.

“Going back to The Wizard of Oz all the way up to Godzilla vs. Kong, how you curate and do it in a thoughtful way, beyond just algorithms, is really the secret to the future of delighting customers on the internet.”

As previously disclosed, Max is expanding into 60 countries, including 39 by the end of the quarter throughout Latin America, and another 21 countries by the end of the year. Kilar said the company would not increase expansion/subscriber guidance, saying Max’s rollout as been good since the start of the year.

“There’s just a lot of wind in the sails,” Kilar said. “Consumers are responding to Max. We added six times of the number of [U.S.] subs in the first quarter. That’s what momentum feels like.”

HBO and HBO Max ended the quarter with a combined 44.2 million subs.

When asked about Turner Sports adding the National Hockey League to its portfolio of National Basketball Association, Major League Baseball and NCAA College Basketball, and the potential for live sports to play a bigger role on Max,  Kilar’s response: “Absolutely.”

“We have the [SVOD] rights,” he said. “We were very careful to get those rights. While we don’t have plans for this year, absolutely we could see that down the road. When we orchestrated Max, it was consciously not to be defined by just on-demand programming.”

Kilar again defended his decision to release Warner’s entire 2021 theatrical mover slate on Max concurrently. Admitting mistakes were made “at the edges,” regarding the decision, Kilar stressed that for the most part, he “couldn’t be happier” with the strategy that he also admitted would be scaled back in 2022.

“You should expect us to lean into theatrical distribution for decades and decades to come,” he said, adding that distribution windows will continue to change. For example, some tentpole titles will begin in theaters, while other movies stream concurrently on Max.

“It’s going to be fascinating how that all evolves,” Kilar said. “The world [of movie distribution] will change and we all need to change with it. In many ways we’re leading that. And I’m very proud that were leading like we have this year.”

Finally, Kilar didn’t disclose pricing on the planned rollout of an ad-supported version of Max later this year. Max currently costs $14.99 monthly — the highest of any SVOD service. Kilar said the AVOD option would be priced so that WarnerMedia is “economically indifferent” whether a consumer chooses ad-supported or ad-free Max.

“We want to make sure that we’re not creating a price that causes us to root one way or another,” he said. “The minute the company starts to [take sides], there’s risk they could be at odds what is best for an individual customer.”

News Analysis: Subs, Hype and Debt: Another Week in the Pursuit of Netflix-Like Relevance

NEWS ANALYSIS — Executives at media giants Disney, Comcast and AT&T took to virtual online events this week (and prior) to brag and cajole Wall Street investors regarding efforts to narrow the divide between their respective over-the-top video platforms and market behemoth Netflix.

The tape measures came out early with Disney CEO Bob Chapek announcing that the company’s branded SVOD platform, Disney+, had just surpassed 100 million subscribers, less than a month after reaching 95 million — but still less than 50% of Netflix’s 203 million subs at the end of 2020.

“The enormous success of Disney+ has inspired us to be even more ambitious,” Chapek said, adding the service plans to release 100-plus new titles per year across its Disney Pixar Animation, Disney Live Action, Marvel, Star Wars and National Geographic brands.

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By comparison, Netflix released more than three times that (371 movies and TV shows) in 2019, while reportedly launching 40 to 50 TV shows (some returning) and movies monthly in 2020. The SVOD pioneer earlier this month said it would alone bow 41 Indian movies and shows this year — a shot across the bow in response to the fact that 33% of Disney+ subs come from India.

Meanwhile, WarnerMedia CEO Jason Kilar raised the bar on the company’s HBO Max service, telling investors he expects between 120 million and 150 million combined HBO Max/HBO subscribers by 2025 — up from the 75 million to 90 million projected in October 2019. The combined platforms ended 2020 with more than 41 million subs.

“We exceeded that milestone more than two years ahead of plan,” Kilar said. “The launch of Max has not only covered the decline in linear-TV subscribers, it has actually driven material growth.”

The co-founder/former CEO of Hulu told investors that based on third-party data, in-house number crunching, and a market-leading $14.99 monthly subscription fee, Max was the No. 2 revenue-generating SVOD in the United States — after Netflix.

When multiplying subs by subscription fees, HBO/HBO Max generated about $7.4 billion in revenue in 2020, compared with about $4.6 billion for Disney+. By comparison, Netflix generated $25 billion in revenue last year and added a record 37 million subs. Max plans to launch a lower priced, ad-supported option in June.

“The economics of Max’s growth are compelling,” Kilar said.

After a measured launch last summer, NBCUniversal’s Peacock streaming service ended 2020 with 33 million app sign-ups or people who created accounts, but weren’t necessarily paying for the SVOD/AVOD hybrid service. Comcast Corp. CEO Brian Roberts claimed Peacock was the second-fastest growing brand (after Zoom) during the pandemic.

But at what cost? The company quietly disclosed in a regulatory filing that Peacock lost $914 million in 2020, while generating $118 million in revenue. Neither HBO Max nor Disney+ are yet profitable. Much of the Peacock fiscal loss is due to opportunity costs associated with NBCUniversal diverting programming to Peacock rather than third-party content licensees — a fiscal conundrum not lost upon Roberts.

“During this year, one of my goals is to step back and comeback with, ‘Okay, we had this start [with Peacock], what are we going to do about it?’” he said.

Analyst Rich Greenfield with Lightshed Partners has a possible suggestion: consolidation. Greenfield contends NBCUniversal and WarnerMedia should merge OTT video operations rather than going it alone to create greater competitive scale in a saturated marketplace.

“We believe it is time for both AT&T and Comcast to abandon the fool’s gold of vertical integration of content and distribution and merge NBCUniversal with WarnerMedia,” Greenfield wrote in a blog post last November. “Abandoning grandiose plans and empire building is a tough psychological hump to overcome. However, it would be a wildly accretive outcome for investors.”

CEO Jason Kilar: HBO Max No. 2 Revenue SVOD Service in U.S.

Backed by an industry leading $14.99 monthly subscription fee, and growing subscriber base, HBO Max is the second-largest (after Netflix) revenue-generating SVOD service in the U.S., according to WarnerMedia CEO Jason Kilar.

Speaking March 12 on the AT&T analyst day, Kilar said more Max subscribers were added in the final seven months of 2020 than linear service HBO added in the previous 10 years.

Kilar said management’s goal around Max from the start has been to reach a broader, younger and more engaged audience than HBO.

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“I’m happy to report, we’re seeing just that,” he said, adding that 43% of the platform audience is under the age of 35, while 50% of viewers are female. HBO typically skews more male viewers.

Since launching on May 27, 2020, Max and HBO have topped 41 million in combined subscribers — a tally WarnerMedia had projected wouldn’t occur until the end of 2022.

“We exceeded that milestone more than two years ahead of plan,” Kilar said. “The launch of Max has not only covered the decline in linear subscribers, it has actually driven material growth.”

Kilar said Max users are twice as “engaged” as HBO users in terms of daily viewing hours — a metric the executive hailed considering Max’s elevated subscription fee.

“Based on publicly available data and analysts’ estimates, we believe that we are already the No. 2 revenue-generating standalone subscription video-on-demand service in the U.S.,” he said.

Kilar said he expects Max revenue per subscriber to continue increase as retail subs comprise an increasing percentage of the overall sub base. Indeed, the executive said the company earns a 90% margin on each retail Max subscriber added in the U.S.

“The economics of HBO Max’s growth are compelling,” he said.

Kilar said WarnerMedia remains “encouraged” by its decision to release all 18 of Warner Bros. Pictures’ 2021 theatrical releases on Max (for 31 days) simultaneously in the U.S. market.

“Given the effects of COVID, we have been happy, proud even, to give consumers the choice to see our great stories in the home or in theaters in 2021,” he said, adding that theatrical releases are often the first content new Max subs stream.

“We have seen a reduction in [subscriber] churn, in part due to the motion picture strategy.”

‘Most People are Not Wealthy’: WarnerMedia CEO Eyes Ad-Supported HBO Max as Antidote to SVOD Cost Fatigue

Maintaining that “most people on this planet are not wealthy,” WarnerMedia CEO Jason Kilar on March 4 said a cheaper ad-supported HBO Max option is a “fantastic thing for fans.”

At $14.99 per month, HBO Max is the most-expensive subscription streaming service on the market. With consumers barraged by competing SVOD options, driving up household spending on par with linear pay-TV, a  less-expensive ad-supported SVOD service may be just what the doctor ordered, Kilar maintains.

Speaking very early from the West Coast on the virtual Morgan Stanley Technology, Media and Telecommunications Conference, Kilar said the pending launch of an ad-supported Max option would help draw budget-conscious consumers.

“It turns out that most people on this planet are not wealthy,” Kilar said. “If we can wake up and use price and be able to invent and do things elegantly through advertising to reduce the price of a service, I think that’s a fantastic thing for fans.”

While Kilar didn’t disclose pricing for ad-supported Max, as the former CEO of Hulu, he understands the marketing. Hulu charges $5.99 monthly with advertising, $9.99 without ads. HBO and HBO Max ended 2020 with more than 41 million combined subscribers in the U.S.

“I’ve seen the [new] service in the terms of the designs that we’ve come up with — I think people are going to be so excited about how we’ve been so thoughtful about the insertion of advertising and how it’s a very organic nature of the experience,” he said.

When asked about Warner Bros. Pictures’ landmark decision to release its entire 2021 slate on Max concurrent with box office launches, Kilar said the data remains in its early days. He said the studio has titles in the pipeline earmarked for theatrical exhibition.

“I think it’s too early to tell if things are changed on a permanent basis with regard to the economics,” he said. “I tend to not think that that’s the case.”

With federal rollout of coronavirus vaccinations in full swing, Kilar said he believes pent-up consumer demand to return to normal and theaters could see a “crazy resurgence” among moviegoers.

“I could easily see that happening,” he said. “And we will be there to serve them in that situation, and proudly so.”

Warner Bros. Revamping Movie Compensation in HBO Max Era

Following Warner Bros. Pictures’ decision to release its 2021 theatrical slate concurrently on subscription streaming service HBO Max in consumer homes (for 31 days) due to the ongoing pandemic, some content creators and talent representatives cried foul, claiming they and their clients were being shortchanged by the new policy.

Now the studio has reportedly implemented new guidelines aimed at better compensating talent and production during the pandemic, according to Bloomberg, which cited sources familiar with the situation. Warner will now pay producers and talent from fees generated by Max to offset lower box office revenue and performance-based bonuses.

Hollywood has often compensated producers and talent with upfront compensation and the potential for a lot more on the backend depending on a movie’s box office success. Actor Robert Downey Jr. reportedly earned $75 million from Disney/Marvel Studios’ Avengers: Endgame under such an arrangement.

But with the pandemic severely curtailing the U.S. box office, Warner’s decision to release movies direct to consumers all but ended that traditional compensation channels, angering filmmakers such as Christopher Nolan and Denis Villeneuve, whose movies Tenet and the upcoming sci-fi remake Dune are released through the studio.

“AT&T has hijacked one of the most respectable and important studios in film history,” Villeneuve told Variety. “There is absolutely no love for cinema, nor for the audience here.”

Talent agencies complained the Max/theatrical strategy “unilaterally determined” a financial value for their clients’ work to “benefit the long-term prospects of HBO Max and the finances of AT&T,” according to Richard Lovett, president of the CAA agency.

Michael Pachter, media analyst at Wedbush Securities in Los Angeles, contends the premium VOD distribution strategy hasn’t proven to be as much of a threat to exhibitors as previously thought. Indeed, Disney has yet to release financial data regarding its decision to offer live-action Mulan directly to Disney+ subscribers for an additional $29.99 fee.

“We think the exhibitors will aggressively negotiate for far fewer films to be released day-and-date on HBO Max, based on the timing of vaccine distribution instead of the full calendar year,” Pachter wrote in a Jan. 11 note.

WarnerMedia contends the situation remains fluid with Warner planning to return to the traditional theatrical window in 2022 following vaccine inoculation.

“Our orientation in these situations is always to be generous,” WarnerMedia CEO Jason Kilar said in a recent interview.

WarnerMedia Boss Jason Kilar Sends Out Staff Memo Announcing Job Cuts

WarnerMedia CEO Jason Kilar Nov. 10 sent out a staff email outlining the company’s ongoing restructuring, which the former Hulu CEO said included addressing “which jobs are being eliminated and which roles have changed.”

The memo did not identify specific positions or personnel. A town hall meeting is scheduled for Nov. 11 at 2 p.m. ET/11 a.m. PT at which Kilar said he will answer staff questions.

Since acquiring Time Warner and creating WarnerMedia, AT&T has grappled with paying down billions in debt and streamlining costs magnified during a pandemic.

Kilar, who was hired by corporate parent AT&T on April 1 to spearhead the former Time Warner company, which includes Warner Bros., HBO and Turner, has previously disclosed that upwards of 20% of WarnerMedia’s staff positions would be let go. In August, Kilar cut about 500 positions, including that of longtime home entertainment boss Ron Sanders, as part of restructuring the company’s entertainment studios, elevating HBO Max companywide, and consolidating commercial activities.

“This is a very painful email to write,” Kilar wrote. “And for a number of you reading this, I realize it will be even more painful to receive. For this, I am sorry.”

“Today, we have arrived at a number of difficult decisions that are resulting in a smaller WarnerMedia team,” Kilar wrote. “This is a function of removing layers and the impact of consolidating previously separate organizations. Starting today in North America, we will be sharing which jobs are being eliminated and which roles have changed. We are continuing to review proposed changes in other countries across our non-U.S. businesses, the timing of which will vary according to local regulatory requirements. Nothing about this is easy. But please know, these reductions are not in any way a reflection of the quality of the team members impacted, nor their work. It is simply a function of the changes I believe we must make in order to best serve customers. For those impacted, we will be offering severance and healthcare packages, in addition to professional services and team member assistance programs.”

Kilar said he anticipates that organizationally, things will “settle down materially” in the weeks and months to come, while adding that WarnerMedia’s future is not static.

“Our future is about inventing ever better ways to move the world through story, which entails embracing change,” he wrote. “I have every confidence in this world class team to do just that.”

To our colleagues who are leaving, I wish there were words to lessen today’s pain. Your contributions are a permanent part of this great company and today’s news does not change that. I am extremely thankful for all that you have done for this team and this mission. I hope that at some point you will look back on all of it with immense pride.

WarnerMedia Planning to Cut Workforce Upwards of 20%

WarnerMedia CEO Jason Kilar is continuing to clean house since being hired earlier this year by AT&T CEO John Stankey to run the former Time Warner entity. Kilar, who formerly headed Hulu, reportedly is seeking additional entertainment cuts approaching 20% of the company’s workforce since eliminating 500 positions in August. Those layoffs included Ron Sanders, president of Warner Bros. worldwide theatrical distribution and president of Warner Bros. Home Entertainment. Cuts in the coming weeks are expected at Warner Bros., HBO, TBS and TNT.

“Like the rest of the entertainment industry, we have not been immune to the significant impact of the pandemic,” a WarnerMedia spokesman told The Wall Street Journal, which first reported the restructuring. “We are in the midst of that process and it will involve increased investments in priority areas and, unfortunately, reductions in others.”

WarnerMedia reportedly had 26,000 employees when it was Time Warner. With the entertainment sector in the midst of the coronavirus pandemic, and studio and TV production in slow motion, WarnerMedia is putting much of its resources into HBO Max, the recently-launched SVOD and pending AVOD platform.

Max had about 4.1 million people activate the app in the first month since launching on May 27. When combined with a negotiations impasse with Roku regarding placement of the Max app on the streaming media manufacturer’s platform, the SVOD and pending AVOD platform significantly lags behind rivals Disney+, Amazon Prime Video and Netflix.

In addition, Warner Bros. continues to push back theatrical releases to 2021, including most recently sci-fi reboot Dune, from December to next year. Robert Pattinson starrer The Batman has been bumped from 2021 to 2022. Patty Jenkins sequel Wonder Woman 1984 has been bumped three times to the current Dec. 25 release.

“There’s nothing that’s sacred anywhere in the business,” Stankey told The Journal earlier this year. “WarnerMedia is no exception to that.”

WarnerMedia CEO Not Concerned With HBO Max Sluggish Start

Speaking recently on CNBC’s “Squawk Box,” WarnerMedia CEO Jason Kilar said he is “not at all concerned” with the slow start for subscription streaming service HBO Max, saying the platform was in a “really good position” based on previous estimates.

“If you look at last year at what we hoped we would be at the end of 2020, which is 36 million HBO and HBO Max subscribers, we announced just recently we are already north of 36 million, and obviously the number is going up every day,” Kilar said.

Kilar was hired May 1 to aggressively guide the former Time Warner company into the digital age — underscored by the May 27 launch of HBO Max. Since an initial observation period, Kilar has implemented massive corporate downsizing resulting in the elimination of about 600 positions across Warner Bros., Turner (except CNN) and HBO.

The former Hulu founder brought in fellow Hulu alum Andy Forssell as GM, spearheading marketing, consumer engagement and worldwide rollout of Max in a crowded SVOD market dominated by Netflix, Amazon Prime Video — and Disney-owned Hulu.

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Despite HBO’s brand recognition, subscriber/consumer adoption of Max has been slow. The service has attracted about 4.1 million subs through parent AT&T’s most-recent fiscal period, despite HBO having more than 35 million existing pay-TV subs. Undermining conversion efforts are ongoing negotiation challenges between WarnerMedia, Roku and Amazon Fire TV — the latter two key to third-party OTT video consumer adoption.

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Consumer adoption of Max pales in comparison to Disney+, which attracted 10 million sign-ups in its first 24 hours last November, and now has more than 60 million subscribers. In addition, NBCUniversal’s upstart Peacock service has generated more than 10 million subs. NBCUniversal owns CNBC.

Kilar argued that when comparing “apples to apples,” Peacock subscriber conversion of linear-TV subscribers isn’t demonstrably better than Max. He said Disney+, on the other hand, has the advantage of leveraging a 100-year-old family brand known globally.

“[Disney] did exactly what they should have done and kudos to them,” Kilar said. “Ours is a very different journey. I would argue ours is a bigger outcome because we are going after all members of the family. The opportunity is bigger, but it does mean the journey is going to be different because we don’t have a 100-year-old surgically-precise brand around families, specifically with kids under the age of 9.”

Kilar was asked if the HBO brand has become confusing to consumers due to the myriad access points, including HBO, HBO Go, HBO Now and Max. He agreed, saying both HBO Go and HBO Now are being “sunsetted,” with the end result continuing to drive users to HBO and the brand’s quality of programming.

“We want people to think of our stories as being a cut above,” Kilar said.

Ron Sanders Exits WarnerMedia, After Storied Career, in Management Reorganization

Veteran Warner Bros. Home Entertainment executive Ron Sanders is among a group of key executives who are leaving the company in the wake of a management restructuring implemented by new WarnerMedia CEO Jason Kilar.

Sanders, president of Warner Bros. worldwide theatrical distribution, and president of Warner Bros. Home Entertainment, has been an integral part of the studio’s retail management for nearly 30 years.

Sanders joins Jeffrey Schlesinger and Kim Williams as the latest high-profile executives among a reported 600 employees let go following the Aug. 7 departure of Bob Greenblatt and Kevin Reilly.

The latest cuts were first reported by The Wrap.

Sanders was named president of worldwide distribution for the entire motion picture group in January 2018, retaining his responsibilities as home entertainment chief. In that role, which he assumed in 2013, he oversaw the global distribution of home entertainment products from Warner Bros. Pictures Group, Warner Bros. Television Group and Warner Bros. Interactive Entertainment. He was also responsible for the studio’s video game publishing business, and helped build WBHE into the industry’s largest digital distributor of films and TV shows through VOD and EST.

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“Ron is an exemplary executive and Warner Bros. was lucky to have him as one of their senior leaders for so long,” said Amy Jo Smith, president and CEO of DEG: The Digital Entertainment Group, where Sanders had held several key leadership roles, including chair. “Ron played a key role in guiding and growing DEG and we will also be grateful for his involvement, his support and his scruples. He’s such a good guy.”

Sanders joined what was then Warner Home Video in 1991 and learned the business from some of the most talented executives of the day, led by then-division president Warren Lieberfarb.

“I hired Ron from Procter & Gamble, where he was a regional sales manager, and nurtured his growth,” said Warren Lieberfarb, hailed as the “father” of DVD. “I promoted him over the years, and he was eminently qualified. I am sure the future will offer him many more opportunities.”

According to a column by Media Play News publisher and editorial director Thomas K. Arnold, “The 1990s were a remarkable time in home entertainment: We saw the rise of sellthrough, the development of direct sales and, of course, the launch of DVD, birthed at Warner by Lieberfarb and his team. … Anyone who knows Ron Sanders, who has worked alongside him, knows how incredibly hard it is to dislike him. When he says something, he means it. When he makes a promise, he follows through. He looks you in the eyes when he speaks to you; he is passionate about the industry, about Warner Bros., about business, about life.”

Sanders ran Warner’s rental business during the tumultuous mid-1990s period of consolidation and copy-depth incentives. He moved into consumer sales just as DVD was taking off and in July 1998 was sent to London as managing director of the United Kingdom and Ireland divisions. A year and a half later, he was promoted to head of the entire EMEA (Europe, Middle East and Africa) region, overseeing Warner’s home video operations in 28 territories.

He returned to the United States in 2002 and was appointed president of Warner Home Video in October 2005. In May 2013 he was named president of Warner Bros. Worldwide Home Entertainment Distribution, with oversight of the global distribution of home entertainment products from Warner Bros. Pictures, Warner Bros. Television, and Warner Bros. Interactive Entertainment (WBIE).

“Throughout this well-deserved rise, Sanders has remained remarkably grounded,” Arnold wrote in his column. “He and I used to swap stories about chauffeuring our kids to soccer games. … Mindful of his experience living with his family in London, Sanders endowed a study abroad program at his alma mater, Auburn University, where he also served on the Harbert College of Business Advisory Council.”

WarnerMedia CEO Jason Kilar Shakes Up Management; Kevin Reilly, Bob Greenblatt Out

Former Hulu CEO Jason Kilar was hired 90 days ago to shake up WarnerMedia and make the branded upstart SVOD service HBO Max competitive with Netflix, Amazon Prime Video, Disney+, Peacock — and Disney-owned Hulu.

Kilar took a major step Aug. 7, letting WarnerMedia chairman Bob Greenblatt and Kevin Reilly, chief content officer for HBO Max and president of TNT, TBS and truTV, go in a major management reorganization. Andy Forssell, who worked with Kilar at Hulu, has been hired to oversee Max.

Jason Kilar

Warner Bros. CEO Ann Sarnoff, who replaced Kevin Tsujihara, and Casey Bloys, president of programming at HBO, will spearhead a combined oversight of studios and networks. No other management changes were disclosed.

Greenblatt and Reilly are industry veterans, with the former leaving NBCUniversal to help launch Max. Reilly has held executive positions at NBC, Fox, FX and Turner.

Kilar, who outlined the changes in a letter to staff, outlined five areas he seeks to improve: HBO Max’s scope and importance within the company; simplifying studio internal structure; creating a consolidated International unit focused on scale and efficiency; bringing our key commercial activities into one group; making other structural changes for efficiency and company effectiveness.

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The management changes aren’t surprising since Max launched with what some observers have characterized as an underwhelming consumer response. AT&T CEO John Stankey said Max generated 3 million subs through the second quarter, ended June 30, adding another one million thus far in the current quarter. With more than 30 million HBO pay-TV subs, including HBO Now, the conversion rate is disappointing.

“Because of the gift that is the Internet, we have what I believe is one of the greatest opportunities in the history of media, which is to deliver our beloved stories and experiences directly to hundreds of millions of consumers across the globe,” Kilar wrote. “The pandemic’s economic pressures and acceleration of direct-to-consumer streaming adoption places an even higher premium on these points.”