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Who is behind the battle between Warner Bros. and Hollywood? AT & T

Even a small sample of the Warner Bros. 2021 movie slate suggests the studio’s big screen ambitions. A desert planet savior that can be killed in one word (“dune”). A huge clash between mutant monsters (“Godzilla vs. Kong”). A local hero who enlivens an enthusiastic dance routine on the rooftop of Uptown (“In the Heights”).

It’s a movie that families, couples, and teenagers once saw on a three-story screen from the comfort of a stadium-style seat, with the bass of the soundtrack rumbling at their feet. But last week, Warner Bros. broke the tradition by announcing the full lineup of 2021 movies to be released on HBO Max (a struggling streaming service) the same day it’s scheduled to appear in theaters.

Hollywood agents and filmmakers were angry with the move, but they may have forgotten something important. Warner Bros. belongs to WarnerMedia, which is part of AT & T. AT & T is also a telecommunications company, and its profits can conflict with the profits of the old entertainment business. When it acquired Time Warner for more than $ 80 billion, despite a major participation in Hollywood last year, AT & T may not care so much if it accelerates the end of the movie-watching habit 100 years ago.

For AT & T, HBO Max is not a convenient way to make movies and TV shows publicly available. Instead, the platform is an important part of the wireless business. HBO Max is included in packages for some high-end phones and Internet subscribers and is partly present to create consumer loyalty to AT & T.

The Warner Bros. movie will also be shown in theaters, but it costs about $ 50 for a family of four (excluding gas, parking, and concessions). As a result, HBO Max’s $ 15 / month fee is stolen. Or it’s easy. Especially during the horror caused by being part of the crowd during the coronavirus pandemic.

AT & T is at risk of losing money in the 2021 movie as the studio focuses on streaming. However, the box office has already hollowed out due to the pandemic, and all major studios are embarking on different release strategies.

WarnerMedia CEO Jason Killer, who helped develop the strategy, is more settled in patient distribution plans given that the coronavirus vaccine could save some of the 2021 box office revenue. I should have been able to. Instead, he did the bold thing that he could sacrifice billions of box office revenues to boost a $ 15 / month streaming platform.

Kilar has just begun streaming and began his career as Hulu’s CEO in 2007. For those who knew him, his move on WarnerMedia wasn’t all that surprising.

In early incarnations, Hulu was completely free and had limited commercial interruptions. The content was dependent on TV rates, but was better than TV broadcasts because it was separated from the network schedule. You can watch what you like for free when you want.

However, many Hulu business owners (Comcast, Walt Disney Company, Fox) were eventually forced to charge Kilar a subscription fee when they learned that the service wasn’t making real money. I did. In addition to the ads already running on the service, the monthly subscription cost effectively mimicked the cable and reduced Hulu’s benefits.

In 2011, Kilar drew Hollywood attention by posting a note blaming the entertainment industry for not having access to the Internet. He left Hulu to set up his own company and eventually found a way back to Hollywood via AT & T. His digital-first approach impressed John Stanky, who became CEO of telecommunications giant in the summer.

Mr. Killer’s recent move has ranked a strong group: talent whose back-end payments depend on box office revenue. And the fact that WarnerMedia obscured the plan until the announcement was useless.

“We’re finding the opportunity to do something with a strong focus on our fans, which is to provide choices,” Kilar wrote in a blog post announcing the move.

His boss, Stanky, actively defended the strategic change on Monday. “When we are really honest about this, I think there is a mutual advantage here,” he said at the UBS Banking Conference.

“I think it’s a great way to get into the market quickly,” he added.

Director Christopher Nolan, who produced Warner Bros.’s “Tenet” and is known as a proponent of the theatrical release, quickly condemned the studio’s plans to release the film simultaneously at the theater and HBO Max.

“Their decisions are financially meaningless, and even the most casual Wall Street investors can see the difference between turmoil and dysfunction,” he said in a statement to The Hollywood Reporter Monday. He went on to call HBO Max the “worst streaming service.”

However, the strategy of attacking Autur and Die Hard in the cinema as a malfunction makes perfect sense for Killer and Stanky. AT & T’s main focus is on wireless services, a $ 71 billion business. WarnerMedia produces half of that.

More importantly, the wireless industry brings far more money than the entertainment business — and it does so in a much more efficient way. AT & T’s wireless division earns three times the pre-tax profit that WarnerMedia brings.

Kilar didn’t love entertainment facilities while at Hulu, but now seems to be exacerbating the content creators who run Hollywood. However, the company he works for has little in common with other entertainment clothing.

For AT & T, HBO Max isn’t just a way to make money, it’s an incentive to prevent phone customers from asylum to their rivals. For every 1% of customers who stick to AT & T, it’s worth about $ 100 million to the company.

Price wars between AT & T, Verizon and T-Mobile have reduced mobile phone bills and reduced profits. Wireless providers have been working to separate subscribers from each other. This is a costly practice, including discounts.

AT & T wants HBO Max to be as profitable as possible. But even if your balance sheet deteriorates, the platform is still valuable if it helps businesses retain their wireless subscribers.

In the fierce streaming competition of recent years, HBO Max finds itself confronting some serious big names. Netflix has nearly 201 million customers worldwide and nearly 70 million in the United States. Disney + is growing rapidly to over 73 million. Hulu, also managed by Disney, has about 37 million people.

As of this week (six months after its introduction), HBO Max had 12.6 million subscribers, or “activation.” These subscribers are effectively getting free tickets to the Warner Bros. 2021 movie. And it’s not just them — their family can be seen like anyone else sharing their login information.

Those who want to watch “Wonder Woman 1984” and “Dune” without risking going to the cinema have a strong incentive to cut $ 15 a month on HBO Max. They can see what they want to see and cancel immediately. Or you might stick to all 17 movies on the 2021 slate.

But how does AT & T make up for the inevitable loss of revenue from theatrical films?

Research firm Moffett Nathanson estimates that WarnerMedia’s average box office revenues exceed about $ 1.8 billion annually, and studios need to be split from the theater chain. This means that AT & T will need to account for about $ 900 million in 2021 movie revenue.

Sure, AT & T will make some box office next year. But the pandemic has undermined even the best marketing plans. When WarnerMedia released “Tenet” in theaters in September, the $ 200 million project generated only about $ 57 million domestically.

You can also make money through online rentals, purchases and cable syndication.

Kilar went ahead and could please Stankey and AT & T’s shareholders and confuse much of Hollywood’s founding. He only needs to get another 5 million HBO Max customers to make up for the box office loss (or 60 million customers pay only for a month). That’s more than the 25 million subscribers who are already on the move at the pace of gathering by May next year.

However, market resolution may not be as easy as it looks. HBO Max is the most expensive streamer and costs $ 180 a year.

Who is behind the battle between Warner Bros. and Hollywood? AT & T

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