As AT&T begins to lay out its plan to drive HBO Max subscribers to 80 million, it believes DirecTV customers could be a crucial component. However, they may not be worth nearly as much as the company thinks.
AT&T relying on existing customers to boost HBO Max
AT&T believes it can drive HBO Max into 80 million homes by 2025, with 50 million coming from the U.S. The company intends to give a big push toward that goal by making HBO Max available at no extra charge to the 10 million AT&T U.S. customers that subscribe to HBO already. Those customers are, according to AT&T Chief Operating Office John Stankey, in two big pools: DirecTV and AT&T wireless subscribers.
However, AT&T believes it can get a lot more mileage out of the DirecTV subscriber base. According to Mr. Stankey:
“We didn’t buy DirecTV because we love satellite. We bought DirecTV because we love the customer base, and the customer base could be migrated into more on-demand-oriented products and services.”
However, those DirecTV subscribers could be worth a lot less to HBO Max’s fortunes than he believes.
Premium TV subscribers in free-fall
When AT&T bought DirecTV in 2014, the satellite provider was still a growing business. At the end of 2013, it had 20.25 million U.S. customers. AT&T also had 5.8 million U-verse TV customers, bringing its total of premium TV customers after the DirecTV acquisition to almost 26 million. At the end of Q3 2019, AT&T had 20.4 million premium TV customers, down 5.6 million from 2014. In Q3 2019 alone, AT&T lost 1.2 million premium TV customers.
There is no way to know precisely how many of the 5.6 million lost customers came from DirecTV and how many from U-Verse TV. However, the last time AT&T separated them in Q2 2018, U-verse still had 3.7 million, slightly up on the previous quarter. In that same quarter, DirecTV had 20 million after losing about 300,000 subscribers.
DirecTV customers unlikely to step up to Max
The significant losses from DirecTV could be due to the company’s new policy to let lower-paying customers leave rather than offering them a new deal to stay. Since average revenue per unit (ARPU) jumped almost $4 a month in Q3, it could be the strategy is working. If the people leaving are paying less than the average subscriber ARPU will go up.
The thinking at AT&T seems to be that the high paying remaining DirecTV customers will be more amenable to paying for HBO Max if they don’t already have HBO. However, that seems unlikely. The customer-base has had ample opportunity to subscriber to HBO, with HBO Go, at the current $15 a month. Moreover, the additional content in HBO Max is unlikely to be enough to persuade them.
The additional Turner channel content in HBO Max is already available through the broadcast channels, pay TV on-demand library, and through Turner apps like TNT Now and TBS. That leaves Warner Bros movies and library content like Friends as the big draw. However, a DVR can easily capture much of the films and shows from broadcast channels if a DirecTV customer wants them.
AT&T will announce the pricing of HBO Max on October 29th. However, if it is in the same ballpark as HBO Now – $15 a month – DirecTV customers that have resisted HBO till now are unlikely to be wooed!
Why it matters
AT&T is banking on being able to woo large numbers of DirecTV customers to subscribe to HBO Max.
Those that already have HBO will get free access to HBO Max.
Those that do not have HBO are unlikely to be persuaded to pay the $15 or so for HBO Max.