According to analyst Michael Nathanson of MoffettNathanson Research, the streamer will surpass the company’s expectations to generate US$8.2 billion in total revenues by 2025 with a growth rate of over 10%.
The researcher’s estimates include fee revenues of US$6.1 billion, content licensing of US$1.1 billion and advertising revenues of US$947 million – prompted by the launch of an ad-supported HBO Max product in 2021. The note however adds that “the upfront incremental HBO Max expenses will put significant pressure on HBO EBIT in 2020.”
Nathanson said that the US$14.99 per month price will initially deter users from signing up, but that “We are not sure that HBO’s premium pricing will be a hindrance to growth.”
The report goes on to say that AT&T’s emphasis on HBO could see other WarnerMedia properties such as the Turner cable networks and Warner Bros. suffer from stunted growth.
Nathanson concluded: “HBO Max is being championed long term, in part at the expense of Turner’s core TNT and TBS Networks.”
“One can make the same argument about Warner’s TV studio, where what in the past were external licensing revenue will now be absorbed to support HBO Max. In total, one can’t escape the sense here that one plus one plus one (HBO plus Turner plus Warner’s TV studio) equals one HBO Max.”
Max Signorelli, research analyst, media and entertainment at IHS Markit said of the service: “HBO Max’s $14.99 pricing puts it right between Netflix’s top 2 tiers but more than double the price of standalone Disney+. An impressive library of content and features will certainly draw subscribers in at first and if its new original shows can draw consumer interest similar to Game of Thrones, it will likely be very successful.”
HBO Max will launch in May 2020 with a promised 10,000 hours of content. Boosting numbers from the start, existing AT&T HBO customers and HBO Now direct-billed subscribers will receive the new service at no additional cost, while AT&T customers who subscribe to the operator’s premium video, mobile and broadband packages will be offered bundles at launch with HBO Max at no additional cost.