HBO’s new HBO Max streaming service will be rolled out on Wednesday. HBO Max is WarnerMedia’s and its parent AT&T’s (T) hedge against consumers cutting the cord to traditional cable and satellite services. It aims to establish a direct relationship with its audience much the way Netflix (NFLX) and Disney+ (DIS) have. AT&T will use its roster of phone, broadband and pay-TV customers to drive subscriptions to the service.
Netflix recently reported its largest subscriber surge in years, while Walt Disney Co.’s Disney+ topped 50 million users just months after it launched.
Top HBO Max executives contemplated delaying the streaming service’s launch in mid-March, when the virus started forcing most Americans to stay home, according to Robert Greenblatt, chairman of HBO Max parent WarnerMedia Entertainment.
However, Greenblatt said, “It quickly dawned on us that people were watching more television and we thought…‘let’s get this thing to the customers.’”
HBO’s subscriber numbers have been relatively flat for the past several years at around 33 million, and WarnerMedia is betting that the broader mix of programming available on HBO Max will appeal to people who avoided HBO due to its often dark content.
At $15 a month, the service will be costlier than its streaming rivals. Netflix currently costs new subscribers $12.99 a month and Disney+’s is priced at $6.99 a month. WarnerMedia had to offer HBO Max at that price, however, because under existing agreements with cable and satellite operators it isn’t allowed to make the service cheaper than HBO or current streaming service HBO Now.
Current subscribers to HBO will have access to HBO Max at no extra charge either through HBO Now or if their pay-TV distributor has cut a deal to offer the new service.
AT&T stock is down 18% over the past 3 months, but TipRanks data shows a Moderate Buy consensus around AT&T stock in the last 3 months. An average analyst price target of $33.62 implies 12.5% upside potential in the shares in the coming 12 months. (See AT&T stock analysis on TipRanks).