Jason Kilar Talks HBO Max Gains

Speaking at AT&T’s Analyst and Investor Day, WarnerMedia CEO Jason Kilar highlighted HBO Max’s gains, its international growth potential, the success of the day-and-date release strategy for new feature films and the importance of the studio’s franchises.

In October 2019, AT&T set a target of 41 million subs for HBO and HBO Max in the U.S. by the end of 2022. That target was set more than two years ahead of plan, Kilar said. “The launch of HBO Max has not only covered the decline in linear HBO subscribers, it has driven material growth. In fact, more HBO subscribers were added in the final seven months of 2020 than HBO added in the previous decade.”

The goal for HBO Max has always been to reach a “broader, younger, more engaged audience,” Kilar said. “We are seeing just that. HBO Max attracts a considerably younger audience; 43 percent of HBO Max viewers are under the age of 35. Fifty percent of the audience is female, whereas HBO has historically had a slight male skew.”

Increasing engagement has also been key. “HBO Max viewers are nearly twice as engaged as their HBO linear counterparts in terms of daily viewing hours.”

Kilar also touted the price that consumers have been willing to pay for HBO Max, which is considerably higher than other new entrants in the market this year. “We believe we are already the number two revenue-generating stand-alone subscription video-on-demand service in the U.S. As time goes on, we expect the amount of revenues we retain per subscriber will continue to increase as retail subscribers comprise an increasing percentage of our base. The economics of HBO Max’s growth are compelling.”

Kilar went on to say that the company is “very encouraged” by the decision to release 18 premium Warner Bros. movies this year in theaters and on HBO Max in the U.S. “Given the ongoing effects of Covid, we have been happy and even proud to give consumers the choice to see our great stories in the home or in theaters in 2021.” Movies are “often the first titles viewed among new subscribers. We have seen a reduction in churn, in part due to the motion picture strategy.”

Subscriber retention has also been boosted by HBO Max’s “expansive and compelling library, smart acquisitions and bold originals,” Kilar said.

Kilar then went on to discuss the June introduction of an AVOD version of HBO Max. “Advertising, when executed thoughtfully and elegantly, is a powerful way to lower prices for everyone. I also believe marketers will be delighted, thanks in part to the safe, addressable, premium environment, unlike any service out there. The pre-launch response from marketers suggests they agree, given we already have $80 million in upfront commitments.”

He also discussed the international rollout, which begins in LatAm in the summer and continues in Europe in the second half. “We’re looking forward to building on HBO Max’s current U.S. momentum and begin to offer it across the globe. These are markets where we have existing presence, key brand awareness, local programming experience and are excited to refresh our product and expand our subscriber base.”

The platform will launch in 39 markets in Latin America and the Caribbean with “an aggressive pricing strategy,” he said. European expansion begins in the second half, with the platform to arrive in 21 countries, building on HBO Europe’s footprint. “With a near doubling of content compared to HBO for the same price, along with a dramatically improved user experience, we think European consumers will quickly embrace this new service.”

By year-end, HBO Max will be in 61 markets—up from one today. Kilar went on to say that the biggest reason for his belief in HBO Max’s prospects—and its ability to be in the top three premium video services worldwide—comes from the company’s storytelling prowess.

“There is no other storytelling team, no other storytelling studio, more associated with quality and excellence than HBO. This is the team that has brought the world more award-winning, culture-defining television programming than any other in history. HBO simply continues to drive culture.”

HBO’s local programming abilities in international markets “will be highly leveraged throughout HBO Max as we expand,” he added.

Kilar also touted the Warner Bros. film slate, the company’s increasing investment in kids’ and family fare and a “deep library of hits, both classics and new,” from Warner Bros. Television, “which gives us a rich universe of IP and relationships and allows us to develop new chapters of hit series, such as Gossip Girl and Pretty Little Liars.” He also mentioned the success of Max originals, notably The Flight Attendant, which quickly became the number one series on HBO Max and has been renewed for a second season.

“We work tirelessly to partner with the world’s best storytelling talent. We provide artists and creators the opportunity to fully realize their creative visions, from motion pictures to television series, unscripted storytelling and documentaries, interactive experiences and consumer products. This unique creative sandbox, along with our culture and our value relationships, are just some of the reasons why we’re fortunate to be in business with, and the home for, many of the world’s best storytellers, people like Ava DuVernay, J.J. Abrams, Mindy Kaling, Greg Berlanti and Issa Rae, among many others.”

He also highlighted the company’s “breakthrough franchises,” among them “the wizarding world of Harry Potter; Gotham, Metropolis and the multiverse of DC; Westeros and Game of Thrones, and the animated world that is Looney Tunes.”

HBO and HBO Max are now forecast to hit 120 million subs by the end of 2025 in the U.S. and the LatAm and European markets that the service is expanding to this year, up from 67 million to 70 million at the end of this year. “We are excited about the prospects of additional market expansion beyond the 61 markets I mentioned earlier. Based on what we see now, we think there’s an opportunity to scale to 150 million subscribers by year-end 2025. That does not include some sizable markets where we have licensing agreements, like the U.K., Germany, Italy and Australia, which we believe represent further upside longer term, beyond the 150 million. This strong subscriber momentum is fueling our top-line growth. We expect HBO Max and HBO revenue to more than double over the next five years to $15 billion. These revenue figures only reflect the initial 61 markets. Other markets would be incremental revenue opportunity to this $15 billion number. We expect to increase our investment over the next several years, with peak dilution in 2022 and then breaking even in 2025.”