Does it matter that HBO Max leaves Roku and Amazon Fire users waiting?
The business implications of AT&T excluding Amazon and Roku users from HBO Max
Today's fun, entertaining debate on Twitter has been about the implications of HBO Max excluding Amazon and Roku users from its launch.
The lengthy debate touches upon something I wrote two months ago about HBO Max's hiring of Jason Kilar:
[AT&T's] John Stankey wants to grow wireless subscribers and reduce wireless churn with HBO Max as an add-on service, and has hired Jason Kilar to oversee a division which will build a video streaming platform that will scale globally, but whose success will only be measured by corporate and investors by wireless subscriber growth and churn.
The business goals for AT&T with HBO Max are being defined for investors as wireless growth and reduced churn, and not as increased total subscribers or reduced churn for HBO. Which means, AT&T's primary goals with HBO Max's launch are to keep existing AT&T customers happy with either a free upgrade or a free trial, thereby reducing churn; and, to make the free add-on of HBO Max for a reason to convert shoppers into new AT&T customers.
How it plays out is more complicated than this, given all the different customers AT&T serves, and all the distribution partners it has offering free upgrades for existing HBO and HBO Now subscribers (as CNET does a good job of breaking down).
The disconnect which surfaced is a real one:
Amazon has confirmed it accounts for 5MM HBO Now subscribers (almost 50% of the 8-10MM HBO Now accounts on top of the ~34MM linear subs) , and Roku accounts for a presumed 2 to 3MM of those.
But, HBO Max launched without deals with either service, leaving those 2MM Roku users without any HBO service, and Amazon Fire devices without HBO Max but HBO Now.
The problem for AT&T with this disconnect is there is no one lens through which to understand it.
One lens says AT&T is looking at 10% of its 50MM target user base owned by Amazon and Roku, and believing they can achieve scale elsewhere at launch (i.e., via Comcast's 29MM Xfinity Broadband customers and Hulu).
But, the investor lens asks, if the goal is growth, why is AT&T bypassing 80-90MM Roku and Amazon Fire device households in the U.S.?
Which means the AT&T launch either aims to keep 8-10MM existing Roku and Amazon customers happy; or leaving them unhappy until business terms with Roku and Amazon can be reached. It chose the latter, and we do not know why:
I think a key piece of information that is missing is when these existing HBO Now deals with Roku and Amazon expire. If they’re up in 2020, then AT&T probably right to hold firm. If they are longer term, then Amazon and Roku in the stronger position.
— TZM (@TZM_TMT) May 29, 2020
To me, I think the answer is simple, and stated above: The business goals for AT&T with HBO Max are being defined for investors as wireless growth and reduced churn, and not as increased total subscribers or reduced churn for HBO. And this is what makes this impasse particularly interesting: if it were not for these business objectives, we would not be witnessing an impasse. HBO Max needs additional scale, and both Roku and Amazon together deliver nearly 100MM connected TV homes.
That points to the larger problem I highlighted in my mailing back in April:
The hiring of Kilar is a step towards getting the tech of HBO Max "right". But it is not clear AT&T's business priorities are in outcomes which involve HBO Max getting the tech "right" to scale globally. Something will have to change, or Kilar will have trouble finding wins.