If the future of premium content is about going direct to the consumer, then AT&T believes it has already paved a path to the masses via a distribution plan it has formulated ahead of the launch of HBO Max.

AT&T and its WarnerMedia unit aren't forecasting subscriber numbers for HBO Max yet, but they believe that the forthcoming SVoD offering will have ample opportunities to get consumers to take the plunge, AT&T chairman and CEO Randall Stephenson said Tuesday at the Goldman Sachs Communacopia conference in New York.

AT&T, he pointed out, has 170 million "customer relationships" through its pay-TV, broadband and mobility services, as well as an opportunity to promote HBO Max at the company's 5,500 retail stores.

AT&T, Stephenson said, touches its customers some 3.2 billion times every year. That direct path to consumers gives HBO Max a distribution advantage, "and that's the play we're running here," he said.

That play is about to get underway, as HBO Max will be "introduced" on October 29, a few months ahead of a broader commercial rollout expected to happen in spring 2020. In May, Stephenson hinted that the new SVoD service will also seek distribution through traditional pay-TV providers.

Figure 1: AT&T and WarnerMedia will offer a first look at HBO Max on October 29.

HBO Max, from AT&T-owned studio WarnerMedia, is expected to launch next spring and feature about 10,000 hours of movies, TV shows and new, original series. WarnerMedia still hasn't announced a price, though The Wall Street Journal reported recently that it will cost "slightly more" than HBO Now, the OTT-delivered standalone service that costs $14.99 per month. If pricing is in that neighborhood, HBO Max will certainly fetch more than Disney+, which is set to debut on November 12 for $6.99 per month, as well as Netflix's "Standard" plan that goes for $12.99 per month.

Although HBO Max will be competing for consumer dollars in the ultra-competitive SVoD market, Stephenson isn't keen on comparisons.

"This is going to be different," he said. "It's not Netflix, it's not Disney, it's not Hulu," he said.

Stephenson said AT&T is also undaunted about its strategy of owning a media company and a network company, holding that it still makes sense to own the pipes and the content. AT&T has a "pretty fundamental" belief that connectivity and content go well together, he noted. While he might've been "hard pressed" to make that argument five years ago, today "we think it makes all the sense in the world."

He also stressed that content creation companies must continue to move toward digital and direct-to-consumer, where all the growth is occurring. If you're a studio focused solely on the "old world" of cable, satellite and even movie theater distribution, he said, "that's probably not a very rosy picture for a content creation company. "

Stephenson also hinted that pay-TV bundles are poised to become skinnier as retransmission costs for broadcast networks continue to balloon. AT&T, he said, has had to make some hard choices about what channels to carry and which to let go of in order to keep its pay-TV business profitable.

"It's going to change how we think about these multichannel kind of offerings," he said, noting that this dynamic will put more pressure on AT&T's ability to carry "fringe" programming. "The bundles probably get skinnier as the retrans rights take more and more of the money. It's just the reality of it."

Elliott recommendations a 'mixed bag'
Stephenson briefly addressed the concerns raised about AT&T and its M&A and spending strategy outlined by Elliott Management, the activist investment company that recently snapped up a $3.2 billion stake in AT&T.

"From our view, it's a mixed bag," Stephenson said, noting that the AT&T board has been discussing the letter from Elliott in depth. While some suggestions from Elliott make sense and require further engagement and discussion, "there are some other areas you look at…and it's not quite as clear as to why that would make sense for us."

"At the end of the day, we're going to evaluate it and talk to them and see what makes sense for all of our shareholders," he said.

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— Jeff Baumgartner, Senior Editor, Light Reading