AT&T Readies for Streaming War

HBO Max becomes a strategic centrepiece for the US carrier

In 2018, we described content as an invasive species in the US wireless market. The country’s major carriers now bundle some form of streaming service with their higher-end wireless plans. Verizon, for example, includes a one-year subscription to the recently launched Disney+ streaming service with most of its unlimited wireless data tariffs. It’s a way of expanding the relationship with subscribers.

Verizon’s largest rival, AT&T, is in a different position than its rivals. AT&T doesn’t have to form partnerships for content now that it has its own vault filled with well-known titles. In 2018, after it acquired Time Warner, which it rebranded as WarnerMedia, AT&T quickly began exploiting its new catalogue by giving customers of its unlimited data plans access to HBO content.

But WarnerMedia’s library goes well beyond HBO, including a long list of hit films such as Joker, Lord of the Rings, The Hobbit, The Matrix and the Lego movie series, as well as TV shows such as Friends, The Big Bang Theory, a nearly endless supply of Warner Bros. cartoons and programming from other content providers. It’s a diverse library of cult classics and recent hits, comedies and tragedies, breaking news and children’s cartoons.

AT&T has been preparing a streaming service to rival Disney+ and Netflix that will include 1,800 WarnerMedia films at launch, along with exclusive direct-to-consumer content. AT&T has commissioned top Hollywood talent for its original programming, with names including Elizabeth Banks, Mindy Kaling, George RR Martin, Conan O’Brien and Ridley Scott. The service, called HBO Max, is set to launch in May 2020.

HBO Max will cost $15 per month, which compares with $7 for Disney+, a starting price of $9 for Netflix and $5 for Apple TV+. But it’s the bundling strategy that makes this an interesting move. AT&T will bundle HBO Max with some of its existing services including with its unlimited mobile plans. This isn’t a new approach, however; Verizon offers Disney+ for free to many of its subscribers, T-Mobile gives Netflix subscriptions to some customers, and Apple provides its Apple TV+ service at no extra cost to anyone buying a new iPhone or other Apple computing hardware.

Highlighting the importance of HBO Max to AT&T’s strategy, in a recent call for analysts, the carrier mentioned HBO Max about 30 times, calling it a “game-changer” and a “critical” ingredient in the company’s larger plans (see Instant Insight: AT&T Results, 4Q19). AT&T has invested more than $1 billion just on the streaming technology, in addition to the $85.4 billion that it spent to acquire Time Warner.

AT&T sees HBO Max as an opportunity to encourage wireless subscribers to move up to higher-priced plans, boosting average revenue per user. It also believes that the package with exclusive content will increase loyalty among subscribers and reduce churn.

Streaming services will be an important initial use for 5G networks, as carriers expand their deployments, with other applications such as cloud-based gaming and augmented reality set to follow. US carriers are following a strategy of induced demand, creating a need for greater bandwidth. Starting in May, AT&T will use 10,000 hours’ worth of content as a practical way to lure and retain subscribers. Content continues to go hand in hand with connectivity.