AT&T (NYSE: T) He revealed some starting numbers for HBO Max in his second-quarter earnings call. The company launched the expanded transmission service in late May, and by June 30, 4.1 million households activated the service. Most signed up directly through hbomax.com or through an in-app purchase, while about 1.2 million activated their accounts through AT&T packages.
While AT&T management says it is satisfied with its first results, they cannot be too happy with the 5.9 million households that still subscribe to HBO without access to HBO Max.
The main reason many households cannot access HBO Max is because AT&T cannot come to terms with Amazon (NASDAQ: AMZN) or Roku (NASDAQ: ROKU) for its connected TV platforms. Most, if not all, of those 5.9 million subscribers signed up for HBO through Amazon channels or the Roku channel.
CEO John Stankey called Amazon specifically during AT & T’s second-quarter earnings call. “Unfortunately, Amazon has taken an approach to treating HBO Max and its customers differently than they have chosen to treat other services and their customers,” he said.
AT&T CEO John Stankey. Image source: AT&T.
Amazon still has the advantage
Earlier this year, Amazon said it had around 5 million HBO subscribers paying through its Amazon Channels service. That gives you considerably more than the 4.1 million subscribers who actively use HBO Max and represents a sizeable portion of HBO’s total AT&T subscriber base. If AT&T wants to significantly increase activations of its new service, Amazon has the keys.
But Amazon doesn’t offer the kind of engagement AT&T wants. Amazon wants to keep HBO subscribers within the Channels ecosystem. That gives you access to viewer data and an opportunity to engage users with additional content outside of HBO. Roku is looking for a similar deal with his Roku Channel offering. AT&T wants Amazon to send users to the dedicated HBO Max app, where they can control data and user experience more strictly.
AT&T believes that it is entitled to the same types of agreements as its predecessors, such as Disney (NYSE: DIS) received. But Amazon and Roku did not have 5.9 million Disney + or Hulu subscribers in their respective Channels products. Investors should remember that Disney and Amazon did not accept the terms until the last minute before the service launched.
Amazon may have been swayed to reach a deal with Disney for the overwhelmingly positive early response to Disney +. Early response to HBO Max has been much quieter. AT&T added less than 3.7 million HBO non-commercial subscribers in the second quarter and just 4.1 million HBO Max activations.
AT&T is getting its way
AT&T may have a lot more to gain than it loses by accepting HBO Max as a subscription option for Amazon Channels or The Roku Channel. More than 22 million HBO subscribers have yet to activate HBO Max despite paying for it through their pay TV provider.
Stankey says the deficit is due to a lack of consumer education. “We still have work to do to educate and motivate the exclusively linear subscriber base,” he said. “We will continue to work with our wholesale partners to drive these activation rates.”
But considering that Amazon and Roku represent roughly 70% of the connected TV market, not having an app on either platform is more likely to be holding back activations. If AT & T’s primary goal is to get more people to use HBO Max and collect data on those users’ viewing habits, then you have much more to gain by sacrificing a fraction of your viewing data to Amazon or Roku.
Amazon and Roku are demonstrating the great impact they can have on the success of a service like HBO Max. Given that 5.9 million subscribers have not been motivated to change their subscriptions to gain access to HBO Max, and an additional 22 million do not bother to activate their subscriptions, one can understand the value of having an application on the main platforms of Connected TV. Media companies that think they can go without a deal with Amazon or Roku are kidding themselves.
