No Streaming Service Now Faces Larger Questions About Its Strategic Vision Than HBO Max

HBO Max

Summary of Newsletter #223

In this week’s PARQOR mailing, I dove into AT&T’s Q2 earnings report and earnings call. My question from the Q2 2020 data and from the call transcript is: is there a need to rethink the marketing of HBO Max within the AT&T ecosystem, and beyond the AT&T ecosystem? And does it need to rethink how it defines a subscriber (as Roku’s Scott Rosenberg seemed to suggest to CNBC)?

In short, does AT&T need to rethink its conversion funnels for HBO Max?

After this week’s earning call and Quarterly Earnings Report, arguably no service faces larger questions about its strategic vision than AT&T’s HBO Max. HBO Max seemed to hit the biggest wall this week, as its reveal that “only 5% of HBO TV subscribers who are eligible for [HBO Max] have activated so far”. Back in April, I asked about the hiring of new WarnerMedia CEO Jason Kilar, “Jason Kilar gets the streaming marketplace, but does AT&T?” I concluded that piece arguing:

Is scaling HBO Max what AT&T COO John Stankey wants? I think the answer is, yes, but that scale needs to drive more wireless subscriptions, first, and HBO Max subscriptions, second. In theory, that makes sense. In practice, as we see, that seems unusually complicated.

Given this, is Jason Kilar being set up for success? Explicitly, the answer is no: how Kilar defines both the target customer and the market opportunity very differently from how Stankey defines both the target customer and the market opportunity.

I think we saw this dynamic play out in AT&T’s earnings call last week. All available evidence from that call, and that earnings report, suggests that there may not even be a vision for HBO Max. Rather, the numbers suggest AT&T management made some lazy, if not terrible, assumptions about their conversion funnels for selling or upgrading subscribers to HBO Max.

Outline

  1. What does AT&T CEO (and former COO) John Stankey want to accomplish with HBO Max?
  2. Those convoluted conversion funnels
  3. How “convoluted” plays out in AT&T’s Q2 Earnings
  4. Why is this happening? And what does it mean?
  5. Conclusion: Is scaling HBO Max what AT&T CEO John Stankey wants? And, is Jason Kilar being set up for success?

So, does AT&T need To rethink its conversion funnels for HBO Max? I conclude:

This quarter’s results suggest Jason Kilar’s DTC vision was the right one, maybe even a better one than Stankey’s cross-company marketing plan. This bodes well for HBO Max’s DTC future, even with a poor performance by the parent company, and even with a roadblock in negotiations with the two platforms representing 80MM households.

Click here for the data and research that led me to this conclusion, and why HBO Max’s direct-to-consumer retail future is looking bright.

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