HBO Max will need a hefty 15 million new subscribers just to break even, according to Wall Street analysts

• AT&T's answer to Netflix, HBO Max, will need to scale faster than its niche predecessor HBO Now to break even and appease investors, Barclays analysts say.
• HBO Max, due out in April, will need at least 15 million subscribers to break even on the cost of programming for the platform, the firm estimated.
• Content for the service is expected to total more than $2 billion per year, according to the report.
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HBO Max, AT&T's answer to Netflix, will need to scale faster than its niche predecessor HBO Now to break even and appease investors, Barclays analysts say.

The streaming-video service, due out in April, will be an amped up version of premium-TV network HBO, with the same programming, plus new originals; movies and shows from other WarnerMedia properties like Warner Bros. and the Turner-branded channels; and classic TV repeats like "Friends" and "The Big Bang Theory."

AT&T said HBO Max will launch with 10,000 hours of content, which is about three times the amount currently on HBO's subscription-streaming outpost, HBO Now, analysts at Barclays wrote in an Oct. 22 report.

The analysts estimate that HBO Max will need to attract between 15 million and 20 million new subscribers to break even on the cost of that content (not including cannibalization).

HBO Now is estimated to have 10 million subscribers after launching in 2015. And it took Hulu eight years to reach that subscriber milestone, the report says. Streaming video is more popular now than when those services launched, so HBO Max may be able to grow faster when it's released in 2020 than either of those services did.

After all, MoffettNathanson estimates that rival service Disney Plus, which launches in November, will hit 18 million subscribers by 2020, thanks in part to a partnership with Verizon that will gift the service to certain customers for free for one year, and a bundle Disney is offering that includes Hulu and ESPN Plus.

But most analysts are expecting Disney Plus to make a much bigger splash than HBO Max. Disney Plus will cost less - at around $7 per month - than the $15 or more dollars HBO Max is expected to cost. (AT&T has not announced the price of HBO Max.) The Barclays analysts are skeptical that HBO Max will match the audience of Hulu and other services before it.

"Given the relative price points of these services, it is tough for us to believe that HBO Max will have a scale anywhere close to the other launches," the note said.

Even if it's a tall order, there's a lot pressure on HBO Max to hit that target.

Some AT&T shareholders, including activist investor Elliott Management, are already criticizing AT&T for its acquisition strategy. Elliott argued in an letter this year that AT&T has failed to clearly articulate and deliver on its vision for DirecTV, acquired in 2015, and Time Warner, acquired in 2018.

Barclays estimates that AT&T will spend more than $2 billion per year on content for HBO Max

Programming for HBO Max will cost AT&T between $2.4 billion and $3.9 billion each year, Barclays estimates.

About $900 million of that will go toward original content, like the forthcoming series "Dune: The Sisterhood" and "The Flight Attendant." The estimate is based on HBO's current spending levels and industry norms.

The other $1.5 billion to $3 billion per year is expected to go toward licensed content, like "Friends" and "The Big Bang Theory," which the platform has already struck lavish deals for.

Netflix, by comparison, expects to spend about $15 billion on content this year. But the streaming giant also has an audience of 158 million paid subscribers.

Barclays' content spending estimates for HBO Max do not include marketing or tech costs, potential declines in cash from licensing fewer shows to other platforms, or account for how the platform's programming strategy might evolve over time.

"This number is likely to scale over time of course for AT&T, and could indeed be conservative should content spend skew more heavily towards scripted series, which tends to be HBO's modus operandi," the note said.

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• Exclusive data shows how much buzz Disney Plus, Apple TV Plus, and HBO Max have built with streaming users before launch
• A WarnerMedia exec describes the challenges of uniting HBO, Turner, and Warner Bros. and launching the company's new innovation lab
• A top Comcast exec on how the TV bundle could be fundamentally changed by new streaming services like Disney Plus and HBO Max