An AT&T executive has revealed that the company’s decision to offload HBO Max to Discovery as part of a broader sale of media assets was due in part to a lack of acknowledgement that AT&T helped build HBO Max into a successful streaming service.
The comment was made by Pascal Desroches, AT&T’s chief financial officer, during an investor conference this week. His assertion was noted in an article published Wednesday by the trade outlet Fierce Video.
AT&T acquired the assets of the multiplex HBO movie network as part of a broader purchase of Time Warner in 2018.
The multi-billion dollar acquisition spurred AT&T to launch the standalone streaming service HBO Max, which offers access to HBO original programming and licensed movies alongside a deeper catalog of content from other parts of the WarnerMedia portfolio, including CNN, TNT, the Cartoon Network, Adult Swim and Warner Bros.
HBO Max was not a runaway success: It suffered early on from a lack of presence on Roku and Amazon Fire TV devices, which account for 70 percent of the streaming television hardware market.
The service also suffered from a severe bout of brand confusion: When it launched, AT&T still supported an earlier HBO-branded streaming service called HBO Go, which required a cable or DirecTV subscription. DirecTV and some cable customers were given free access to HBO Max with their HBO subscription, while customers of certain other cable companies were not.
While streamers were slow to take up HBO Max, AT&T executives said they were “pleased” with how the streaming service was performing and said HBO Max’s build-out was a slow race instead of a sprint.
“You sometimes get laid up against what [Netflix has] done over the course of a decade,” John Stankey, the chief executive of AT&T WarnerMedia, said at a conference last September. “I understand that that standard is a high standard, and it’s one that we aspire to get to, but we’re not going to get there overnight, nor are we trying to build the exact same product that Netflix has.”
Over time, many of the issues that plagued HBO Max in the beginning were resolved — the service is now available on Roku and Amazon Fire TV devices, and the company has expanded its partnership with pay TV customers to the point where most, if not all, now have access to HBO Max with their regular HBO subscription.
HBO Max was also bolstered by a decision last December to offer new theatrical releases through the service. The move came as WarnerMedia and other entertainment companies grappled with the economic woes of the ongoing coronavirus pandemic, which forced movie theaters and other businesses to temporarily close.
The move was not new: Both Comcast and the Walt Disney Company had released their new movies on digital platforms. But where those companies charged a premium for the films — sometimes as much as $30 — AT&T decided to offer its new Warner Bros. movies to HBO Max as part of their regular subscription, which cost $15 a month.
The decision helped supercharge HBO Max at a time when the company was still struggling to attract subscribers. As of July, AT&T said HBO’s programming reaches over 47 million households in the United States, with many of those customers receiving HBO Max.
Earlier this year, AT&T surprised the media industry when it announced plans to spin off WarnerMedia into a separate company, one that is expected to merge with Discovery Communications at some point next year.
Last week, Discovery Chief Executive Officer David Zaslav said he did not anticipate any pushback from federal regulators, indicating the AT&T-Discovery transaction is likely to sail through.
This week, Desroches suggested the deal was structured in a way so media investors could put their money in WarnerMedia while telecom investors interested in AT&T wouldn’t have to worry about being bogged down by the media side of the company.
“It’s a combination of we needed to make sure we had additional investment capacity as well as making sure that our capital structure was efficient and provided, and unlock value for shareholders,” he said.