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Here's How Big AT&T Thinks HBO Max Can Get by 2025

By Evan Niu, CFA - Oct 31, 2019 at 8:00AM

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Ma Bell is hoping to add 16 million U.S. HBO subscribers by then.

With Apple and Disney gearing up to launch their respective video-streaming services in the days and weeks ahead, AT&T (T -0.50%) just shared more details with investors about its forthcoming flagship streaming service, which it confirmed a few months back would be named HBO Max.

One of the most important lingering unknowns until now was price, with many expecting AT&T to price HBO Max higher than HBO Now since it will include even more content. Instead, AT&T is aggressively pricing HBO Max at the same $15 per month. HBO is already at the premium end of the spectrum, banking on its reputation for quality content, and pushing even higher may have been hard to justify.




$15 per month

Netflix (standard plan)

$13 per month


$7 per month

Apple TV+

$5 per month

Data sources: Companies. Prices do not include promotions or discounts.

AT&T also announced that the service will launch in May 2020. Here's how big the telecommunications and media giant thinks the service can get by 2025.

HBO Max logo with pricing and availability details

Image source: AT&T.

50 million U.S. subscribers generating $5 billion in incremental revenue by 2025

After showcasing other details of the service, AT&T CFO John Stephens walked investors through the domestic business implications. The company believes that it can grow the total HBO U.S. subscriber base to 50 million subscribers by 2025, compared to the 34 million subscribers that the company currently has between HBO Now and linear cable subscriptions to the service. The latter figure includes roughly 10 million subscribers that are already on one of AT&T's various video platforms.

Chart showing HBO's project domestic subscriber growth

Image source: AT&T.

AT&T wants to convert as many subscribers to the new direct-to-consumer (DTC) service as possible, pulling a variety of levers such as free upgrades to current HBO Now subscribers -- but only for subscribers with a direct billing relationship. Those that subscribe through third-party digital platforms or cable distributors will not get the free upgrade.

The forecast calls for HBO to generate $1 billion of incremental domestic revenue per year, reaching $5 billion by 2025. "As you can see, by 2025, we expect annual incremental revenue to reach about $5 billion," Stephens said. "That includes subscription, content, and advertising revenue."

Chart showing projected incremental HBO domestic revenue

Image source: AT&T.

That incremental revenue growth is expected to soon outpace the related rise in costs, but Stephens said it was a no-brainer:

Obviously, it takes a high level of investment to make all this happen. For us, it's pretty simple: We invest initially to build a sustainable, profitable enterprise. As we do that, our incremental revenues grow, go up, and our incremental net investment goes down. That's an easy decision for us.

Chart showing projected HBO incremental domestic net investment

Image source: AT&T.

Ma Bell's net incremental investment will hit $2 billion in 2020 as the service ramps up, but over time HBO Max's incremental revenue will nearly balance out the investment around 2024. "Our incremental investment includes spending for new content, foregone licensing revenue for our content, and operating expenses for the direct-to-consumer platform, and customer acquisition costs," the finance chief added. HBO Max is forecast to become accretive to earnings in 2025, Stephens said.

Evan Niu, CFA owns shares of Apple, Netflix, and Walt Disney. The Motley Fool owns shares of and recommends Apple, Netflix, and Walt Disney. The Motley Fool has the following options: short January 2020 $155 calls on Apple and long January 2020 $150 calls on Apple and recommends the following options: long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, long January 2021 $60 calls on Walt Disney, and short January 2020 $130 calls on Walt Disney. The Motley Fool has a disclosure policy.

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