AT&T sets loftier subscriber goal of 150 million for HBO Max

HBO Max plans to expand to 60 markets outside the US this year and will launch a lower-cost version with advertising in June.

HBO Max and HBO had over 41 million subscribers combined at the end of the fourth quarter. Of that number, 17.2 million people had activated their HBO Max accounts.. (AP Photo/Mark Lennihan, File) (AP)

AT&T Inc. now expects its HBO Max streaming platform to reach 120 million to 150 million subscribers and break even by 2025, a sharp increase in its hopes for a service that's key to the company's future.

In October 2019, AT&T set a goal of hitting 50 million U.S. subscribers by 2025, a relatively low bar considering the HBO cable channel had about 33 million subscribers a few months before the streaming service launched in May that year. That goal looks easily achievable now.

AT&T, which acquired the HBO brand along with the rest of WarnerMedia for $85 billion in 2018, has bet that it can challenge streaming giants like Netflix Inc. It's an uphill fight -- Netflix already has more than 200 million users -- but the latest projections helped reassure investors that AT&T is making headway. Its shares gained as much as 4.5% on Friday.

“We expect HBO Max and HBO revenue to more than double over the next five years to $15 billion,” WarnerMedia Chief Executive Officer Jason Kilar said during a presentation.

HBO Max will have 67 million to 70 million subscribers worldwide by the end of 2021, AT&T predicted. The company had previously forecast 75 million to 90 million subscribers globally by 2025.

AT&T has had a marketing challenge with HBO Max. It sells the new streaming service alongside the traditional HBO cable channel, which many customers get through their pay-TV provider. The two cost the same, but HBO Max has far more programming.

HBO Max and HBO had over 41 million subscribers combined at the end of the fourth quarter. Of that number, 17.2 million people had activated their HBO Max accounts.

The HBO Max news was a highlight of an investor presentation that also laid out AT&T's goals for its fiber-optic network. It plans to have connections available to 3 million homes by year-end, up from the 2 million it previously forecast. The Dallas-based company left its financial outlook unchanged.

Every media giant is vying for streaming subscribers, but Netflix and Walt Disney Co. are the biggest contenders. Netflix is the market leader, and Disney has the fastest-growing major service, Disney+, which topped 100 million users just 16 months after its launch.

But thanks in part to HBO Max's higher-than-average price -- $15 a month -- it's taking in more money than some streaming rivals. In fact, HBO Max is near the top of the industry by that measure, Kilar said, without saying where other companies rank.

No. 2 in Revenue?

“Based on publicly available data and analyst estimates, we believe that we are already the No. 2 revenue generating stand-alone subscription video-on-demand service in the U.S.,” Kilar said.

Expanding HBO Max to other countries is a costly endeavor, especially as the company steps up production of shows for local markets. The toll from those expenses will peak in 2022, AT&T said, putting it on track to break even by 2025.

Kilar said that 10 months into the launch of HBO Max it is already bringing in more revenue than HBO, which debuted nearly 50 years ago.

And ultimately, the hope is that HBO Max's success will bring more customers to AT&T's main business: telecom services.

Cheaper HBO Max

AT&T said it would share more details about the ad-supported version of HBO Max later, but said Friday that the platform will be mostly the same as HBO Max, only with ads. The cheaper service won't include new movie releases or ads on HBO original series.

HBO Max saw a surge in subscribers late last year after reaching a distribution deal with Roku Inc., the maker of set-top boxes for streaming. The decision to let home viewers watch the premiere of “Wonder Woman 1984” on the same day as it opened in theaters also brought a boost.

WarnerMedia announced in December that it would take the same approach with all its major movies in 2021. That sparked an uproar in Hollywood, which has long protected the so-called theatrical widow -- the time when a movie plays exclusively in theaters.But the company isn't going to reverse course. Movie theaters are still operating at reduced capacity, and certain markets, such as Los Angeles, are only just beginning to reopen.

“We're sticking to our plan,” Kilar said in an interview Friday.

By Gerry Smith and Scott Moritz