HBO Max Could Add $4 Billion In Incremental Revenues For AT&T By 2024

by Trefis Team
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AT&T (NYSE:T) is expected to launch its new streaming service, HBO Max in May 2020, taking on the likes of Netflix, Amazon, and Hulu in the streaming market. While AT&T already offers some streaming services such as HBO Now, HBO Max is likely to be more significant as it will include a sizable library of content from not just HBO but also Warner Bros, Turner Broadcasting, and the DC Universe. AT&T has also indicated that it will invest an additional $4 billion in content for HBO Max over the next ~5 years. We estimate that the service could add incremental U.S. revenues of about $4.3 billion for AT&T by 2024. For perspective, AT&T is likely to post revenues of about $187 billion in 2019, with its Media operations likely to post revenues of over $35 billion.

View our interactive dashboard analysis on What’s The Revenue Potential For AT&T’s HBO Max Streaming Service In The U.S.?

A Closer Look At The Streaming Video Market In The U.S.

  • While Netflix had over 60 million U.S. subscribers as of 2018, Amazon’s Prime offering, which includes a video service, has over 100 million customers. Hulu had about 25 million subscribers.
  • Hulu’s monthly ARPUs are the highest, standing at an estimated $13 in 2018, driven by its ad-supported model, followed by Netflix at about $11 and Amazon Prime at $10.
  • Amazon Prime generates the highest revenues, estimated at about $12 billion in 2018, followed by Netflix and Hulu, which posted U.S. revenues of $7.6 billion and $4 billion, respectively.
  • Amazon Prime remains tops in terms of U.S. household penetration with about 79 % of U.S. households opting for the service in 2018, followed by Netflix and Hulu at ~48% and 20%, respectively.

Estimating Revenues From HBO Max

  • HBO’s TV channels reach about ~140 million global TV subscribers and the company offers the HBO Now service as an a la cart streaming option with exclusive HBO content. It’s likely that HBO Now users will get access to HBO Max – which will have a larger library of content -at no extra charge.
  • We estimate HBO Max’s incremental revenue potential by looking solely at the new customers that the new HBO Max service could bring in.
  • We estimate that HBO Max will see adoption by 8% of U.S. households by 2020, with the number rising to 16% by 2024, translating into a paying subscriber base of 10 million by 2020 and 21 million by 2024.
  • At an ARPU of $15 per month in 2020, rising to $17 by 2024, we estimate that HBO Max will generate revenues of about $2 billion in 2020, with the number rising to close to $4.3 billion by 2024.

For more information and charts on how we estimate HBO Max revenue, view our interactive dashboard analysis.

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