When Does Big Media Become Self-Sufficient In Streaming?

AT&T says 50 million is the number of HBO Max subscribers it needs to be a viable business, attaining a level of self-sufficiency. Is that the same for all major streaming platforms?

John Stankey, chairman-CEO AT&T, revealed this goal at the UBS keynote yesterday.

But reading into this -- does that mean all those HBO channels don’t need traditional pay TV anymore -- cable, satellite, or telco?

HBO Max growth has risen 4 million in subs since the end of the first quarter, now standing at 12.6 million. These are HBO customers “migrating” from legacy HBO products. Overall, HBO Max/HBO count 38 million subscribers.

So how does one define the 50 million mark? Figuring its $16/month price tag, that comes to roughly $9.6 billion a year in revenue. This compares to HBO’s traditional 2019 revenue of $6.8 billion.

All this would be still less than a top-drawer cable network -- albeit an ad-supported cable network. ESPN pulled in $11.4 billion of revenue in 2019: $8.6 billion in affiliate fees, $2.3 billion in advertising and $500 million in streaming.

Digging deeper, 2020 estimates for ESPN show the big sports TV network was in 81.7 million homes via traditional pay TV services; another 8.9 million through virtual pay TV provider and 7.5 million for its D2C service, ESPN+.

That total is now 98.1 million for ESPN. All this is against a Nielsen household TV universe of the 121 million for the 2020-2021 season.  So that’s a pretty good number. The bad news: That big 82 million number of falling steadily.

Yes, it's apples and oranges: an ad-supported TV network versus a non-ad premium cable network. Programming production costs also vary: WarnerMedia/HBO with big theatrical movie efforts and ESPN with ever-higher professional sports leagues' right fees. Also, HBO Max has a higher streaming subscription price than ESPN+ -- $15.99/month versus $5.99/month.

Factoring in lower distributing virtual fees, but also revenue lost from traditional network's “migrating” customers.

The idea of course -- along with the expected ad-supported HBO Max option coming -- is to generate more money than it has been — and to give AT&T more direct-to-consumer control. At the same time, many believe the streaming world will provide consumers with more options.

Is there a real win-win here?

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