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Analyst Sees HBO Max Hitting 51M Subs by 2025

Analyst Michael Nathanson of MoffettNathanson Research is projecting that AT&T’s upcoming streaming service HBO Max will reach almost 51 million subscribers by 2025--even more than AT&T is expecting.

“We’re less optimistic about profitability for both HBO itself and for its impact on [AT&T unit] WarnerMedia more broadly,” Nathanson said in a note Monday.

HBO Max will be AT&T entry into the TV industry's streaming wars. Among its competitors will be industry leader Netflix and Disney+, which quickly gained 10 million subscribers the first day it was available last week. Comcast is also planning to join the fray next year with its ad-supported Peacock service.

Nathanson sees HBO Max generating $8.2 billion in total revenues by 2025, with a growth rate of more than 10%. “However, the upfront incremental HBO Max expenses will put significant pressure on HBO EBIT in 2020.”

Nathanson’s forecast for 2025 includes fee revenues of $6.1 billion, advertising revenues of $947 million (AT&T is supposed to launch an ad-supported VOD product in 2021, and incremental content licensing of $1.1 billion.

Moody’s last week said that AT&T’s decision to price HBO Max at $14.99 a month was a mistake because it was more expensive than other competing services. But Nathanson said that while the high price tag will initially limit growth, as HBO Max adds more high-quality consumer will probably buy in. “We are not sure that HBO’s premium pricing will be a hindrance to growth,” Nathanson said.

Nathanson also notes that with AT&T putting all of its chips on HBO, the other WarnerMedia units--the Turner cable networks and Warner Bros.-- could be hurt in terms of revenue and growth,

Turner already faces declining distribution because of cord cutting and will be facing lower ratings which will impact advertising revenue.

“HBO Max is being championed long term, in part at the expense of Turner’s core TNT and TBS Networks,” Nathanson said.

“One can make the same argument about Warner’s TV studio, where what in the past were external licensing revenue will now be absorbed to support HBO Max,” he added. “In total, one can’t escape the sense here that one plus one plus one (HBO plus Turner plus Warner’s TV studio) equals one HBO Max.”