Will AT&T See Max Revenue From Ad-supported HBO?

Author

Michael Beach
September 24, 2020

Big news: Details are starting to emerge around advertising with HBO Max.

Key details for HBO Max advertising:
1) Launching in spring 2021
2) 2 minutes/hour for movies
3) 4 minutes/hour for TV shows
4) ≈ $80 CPM5) $250K quarterly commitment

Big question #1: How does this ad load compare to other offerings?

Ad minutes per hour:
1) Linear TV – 16 – 20
2) Hulu – 9
3) Digital video – 8
4) Peacock – 5
5) HBO Max – 2-4

Big question #2: Why does HBO Max want ads?

Quick answer: Advertising will increase the average revenue per user (ARPU) beyond the $15/month subscription.

Quick math on the advertising model for HBO Max:
1) Ad minutes/hour – 3
2) 30s spots/hour – 6
3) CPM $ – ≈ $80
4) $/spot – $0.08
5) Ad revenue/hour – $0.48

HBO Max domestic subscribers (% growth) according to AT&T:
1) 2019-Q4 – 34.6M
2) 2020-Q2 – 36.3M (↑ 5%)

HBO Max domestic subscriber projections (YoY growth):
1) 2019 – 34M
2) 2020P – 36M (↑ 6%)
3) 2021P – 38M (↑ 6%)
4) 2022P – 41M (↑ 8%)
5) 2023P – 44M (↑ 7%)
6) 2024P – 47M (↑ 7%)
7) 2025P – 50M (↑ 6%)

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