“Advertising, when executed thoughtfully and elegantly, is a powerful way to lower prices for everyone,” said Kilar, speaking Friday at AT&T’s analyst and investor day presentation. He didn’t reveal key details of the HBO Max AVOD tier like pricing or ad load.
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In terms of content, the only difference between the ad-supported HBO Max and the regular $14.99-per-month premium service is that the the AVOD tier will not include the day-and-date Warner Bros. movie premieres throughout 2021, Kilar said — otherwise, “everything else will be the same.”
In addition, Kilar also confirmed that the HBO Max AVOD version will not include advertising in HBO original series. While he didn’t announce pricing, Kilar said he feels “very, very comfortable” about the ability of the cheaper, ad-supported HBO Max tier to actually produce higher average revenue per user than the ad-free U.S. business.
According to Kilar, WarnerMedia estimates that HBO Max is currently the No. 2 revenue-generating standalone SVOD service in the U.S. (after Netflix). At the end of 2020, WarnerMedia reported 17.2 million HBO Max activated accounts, which implies an annual run rate of $3 billion in revenue.
“The biggest reason I feel strongly about the prospects of HBO Max… is because of the stories we get to tell,” Kilar said, predicting the streamer will be among the top three global direct-to-consumer services in the market.
A major driver for HBO Max in 2021 is expected to be its day-and-date release of the 18 films on Warner Bros.’s slate at the same time as theaters, including the upcoming “Godzilla vs. Kong” (March 31), Kilar said — however, at this point, WarnerMedia hasn’t said what its theatrical windowing plan is for 2022. The WarnerMedia exec also cited HBO Max’s expanded investment in kids and family programming.
On the DC front, with the March 18 premiere of the four-hour “Zach Snyder’s Justice League” (aka the “Synder Cut”) the company will have two dozen projects from the DC Universe. Kilar also touted WarnerMedia’s franchises including HBO’s Game of Thrones, Looney Tunes cartoons and the Harry Potter films, as well as HBO Max original series “The Flight Attendant” starring Kaley Cuoco, which will return for Season 2 in spring 2022.
AT&T expects HBO Max’s AVOD tier to help boost overall HBO Max/HBO growth in 2021, along with the international expansion of the premium version of HBO Max in 60 Latin American and European markets. The company expects to end the year with between 67 million and 70 million HBO/HBO Max subscribers worldwide, up 10%-15% from the end of 2020.
Kilar also said HBO Max overindexes on younger consumers — with 43% of customers under the age of 35, versus 15% of traditional HBO linear customers. In addition, HBO Max users watch an average of 2.8 hours of programming daily, nearly twice that of 1.5 hours of HBO linear subs.
In a significant upward revision, AT&T said it now expects 120 million-150 million HBO Max and HBO subscribers by the end of 2025, up from the 75 million-90 million it previously projected in the fall of 2019. Roughly half of the 2025 subs are expected to be in non-U.S. markets, Kilar said. In the U.S. AT&T’s wireless and broadband business will remain a key distributor of HBO Max (representing about 25% of subscribers).
AT&T expects HBO’s revenue to more than double over the next five years. In 2020, HBO had $6.8 billion in operating revenue — and Kilar expects that to be around $15 billion by 2025. In the U.S., WarnerMedia expects HBO’s average revenue per subscriber (inclusive of wholesale, retail and AVOD) to increase from $11.70 in 2020 to $14 in 2025. According to Kilar, the company earns 90% margin on each new HBO Max retail subscriber.
HBO Max’s 2021 international expansion will not include major markets like the U.K., Germany, Italy and Australia, where WarnerMedia sees additional future upside, Kilar said.
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