Who’s Behind the Fight Between Warner Bros. and Hollywood? It’s AT&T

Even a small sample of the Warner Bros. 2021 film slate suggests the studio’s big-screen ambitions: a desert-planet messiah who can slay a word (“Doon”); A heavy conflict between mutant monsters (“Godzilla vs. Kong”); A local hero who whips up frantic dance routines in the city’s rooftops (“at the heights”).

They are the type of movies that families, couples and teens once watched on the three-story screen from the comfort of stadium-style seats, with the bass notes of the soundtrack rumble on their feet. But last week Warner Bros. broke the tradition Is announcing It will release its full lineup of 2021 films on HBO Max – its struggling streaming service – the same day they were scheduled to appear in theaters.

Hollywood agents and filmmakers were angered by the move – but they must have forgotten something important: Warner Bros., which belongs to WarnerMedia, is part of AT&T. And AT&T is a telecommunications company whose interests are sometimes with those of the old entertainment business. Despite being largely associated with Hollywood Last year, when this Bought time warner For more than $ 80 billion, AT&T may not be so bad if it speeds up the demise of the centuries-old film habit.

For AT&T, HBO Max is not a convenient way to get movies and television shows to the public. Instead, the platform is an important part of its wireless business. HBO Max is included in the package for some high-end phone and Internet customers, and it exists, in part, to build consumer loyalty for AT&T.

Warner Bros. films will also run in theaters – but watching them this way will cost a family of four $ 50 (excluding gas, parking and concessions). It steals a monthly $ 15 fee for HBO Max. Or even a no brainer. Especially during times of fear caused by being part of a crowd during the coronovirus epidemic.

The studio’s emphasis on streaming certainly puts AT&T at risk of losing money on its 2021 films. But the box office is already hollowed out due to the epidemic, with every major studio making their move into their release strategies.

Jason killer, WarnerMedia’s chief executive, who helped formulate the strategy, could compromise on a more patient delivery plan, noting that Coronavirus vaccines could salvage some of the 2021 box office. Instead, he did some audacious work by sacrificing billions in box office receipts to promote a $ 15-per-month streaming platform.

Mr. Killer had his streaming debut, starting his run as chief executive of Hulu in 2007. For those who knew him, his move to WarnerMedia was not too surprising.

In its early incarnation, Hulu was completely free, with limited commercial interruptions. It relied on television fare for its content, but it was better than broadcast TV because it divorced from the network schedule. Watch whenever you want, for free.

But many of Hulu’s corporate owners – Comcast, the Walt Disney Company, and Fox – eventually forced Mr. Killer to impose a subscription fee when they saw that the service was not making real money. A monthly subscription cost, on top of the services that were already running on the service, effectively cut the profits of Hulu, by removing cable.

In 2011, Mr. Killer gained Hollywood attention by posting a memo to the entertainment industry for failing to take advantage of the Internet. He left Hulu to start his own company and eventually found Their way to hollywood Through AT&T, his digital-first approach was influenced John stankey, Who became the chief executive of the telecom giant in the summer.

Mr. Killer’s latest move is A powerful group rank: talent, Whose back-end payouts are contingent on box office earnings. And the fact is that WarnerMedia kept its plan under wraps until the unveiling helped.

Mr. Killer wrote, “We get the opportunity to focus strongly on fans, which provides choice.” blog post Announcement of the move.

Mr Stanke, his boss, vigorously defended the change in strategy on Tuesday. At the UBS banking conference, he said, “I think when we are being really honest about this, there is a win-win here.”

He said: “We think this is a great way for us to enter the market faster and faster.”

Director Christopher Nolan, who created “Theories” for Warner Bros. and is best known as a proponent of theatrically released films, intensified the studio’s plans to release his films simultaneously in the studio and on HBO Max. Condemned.

“Their decision makes no economic sense, and even the most casual Wall Street investor can see the difference between disruption and laxity,” one said Statement The Hollywood Reporter on Monday. He called HBO Max “the worst streaming service”.

But a tactic that attacks autifers and cinema dies as daring, a true connotation for Mr. Killer and Mr. Stanke. AT & T’s primary focus is its wireless service, a $ 71 billion business. WarnerMedia generates half.

More important, the wireless industry brings in significantly more money than the entertainment business – and does so in a much more efficient way. AT&T’s wireless division is three times the pretax profit brought by WarnerMedia.

Mr. Killer did not endear himself to establishing entertainment during his time in Hulu, and is now beginning to excite the content creators who make Hollywood. But the company he works for has little to do with other entertainment organizations.

For AT&T, HBO Max is not just a way to make money, but serves as an incentive for phone customers to keep in touch with their competitors. Every 0.01 percent customer Those who stick to AT&T cost the company around $ 100 million.

A pricing war between AT&T, Verizon and T Mobile Has reduced mobile phone bills and cut profits. Wireless providers have taken customers away from each other – a costly practice that includes discounts.

AT&T still wants HBO Max to be as profitable as possible. But even though its balance sheet suffers, the platform can still be valuable if the company helps wireless subscribers hang.

In the streaming competition that has heated up in recent years, HBO Max finds itself up against some serious heavyweight. Netflix is ​​closing on 201 million subscribers worldwide, with around 70 million in the United States. Disney + has grown to over 73 million. There are also about 37 million in Disney-controlled Hulu.

By six months after this week began – HBO Max had 12.6 million subscribers, or “activation”, as the company calls them. Those members are, in fact, receiving free tickets for the 2021 slate of Warner Bros. films. And it’s not just for them – their family members can also see, as well as anyone who shares their login information.

Those interested in watching “Wonder Woman 1984” or “Doon” without risking a trip to the movie theater have a strong incentive for HBO Max to drop below $ 15 for a month. They can see what they want to see and quickly cancel. Or maybe they will stick around for all 17 films on the 2021 slate.

But how will AT&T make up for the inevitable loss of revenue from theatrically released films?

WarnerMedia’s average box office revenue topped $ 1.8 billion annually according to research firm MoffettNathanson’s estimate, an amount that studios would have to split with theater chains. This means AT&T will have to invest approximately $ 900 million in 2021 film revenue.

To be sure, AT&T will earn some at the box office next year. But the epidemic has also affected the best laid marketing plans. When WarnerMedia released “Tenet” in theaters in September, the $ 200 million project grossed nearly $ 57 million domestically.

It will also earn some money through online rental and shopping as well as cable syndication.

Mr. Killer may have gone further, pleasing Mr. Stankey and AT&T shareholders, possibly greatly upset by the founding of Hollywood. The loss of the box office (or 60 million subscribers paying for just one month) requires them to acquire only five million HBO Max subscribers. It will top 25 million customers that are already on pace to gather by May.

But solving the market may not be as easy as it appears. HBO Max is the most expensive streamer at $ 180 a year.

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