at&t-stock-gains-as-warner-bros.-shakes-up-film-strategy-to-boost-hbo-max

AT&T Stock Gains As Warner Bros. Shakes Up Film Strategy To Boost HBO Max

Business

AT&T stock climbed Friday after the company’s film studio, Warner Bros., shook up its film-release strategy, a move that could have far-ranging effects on the entertainment business. AT&T (T) and Warner are trying to boost their HBO Max video streaming service to take on Walt Disney (DIS) and others.

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Warner late Thursday announced that its full 2021 theatrical slate will be released on the same day on HBO Max and in movie theaters. After one month, the films will continue to play in movie theaters and follow the traditional release windows. AT&T stock gained 1.1% to close at 29.54 on the stock market today. Disney stock edged up 0.6% to 154.14.

AT&T recently said that “Wonder Woman 1984” would debut on HBO Max and in theaters this Christmas day. But Warner shocked the entertainment industry by saying it will use a similar release strategy in 2021 for 17 films. They include “The Matrix 4,” a “Dune” remake, and “The Suicide Squad.”

“Shifting Wonder Woman 1984 was a smart and tactical move on the part of AT&T management to drive demand for HBO Max at a crucial point in the development of global streaming services,” said Credit Suisse analyst Douglas Mitchelson in a report to clients. “But moving the entire 2021 slate marks a bold, sustained commitment to HBO Max well beyond our expectations.”

The move hit theater owners hard. Shares in Cinemark Holdings (CNK) plunged 22% on Thursday, but rebounded 8.7% to 14.45 on Friday. AMC Entertainment Holdings (AMC) fell 16% on Thursday and dropped another 3.3% to 3.51 on Friday.

AT&T Stock: Film Release Overhaul Aims To Boost HBO Max

AT&T and Warner say it’s a one-year move during the coronavirus pandemic. But analysts say it will be hard for Warner to revert to industry-standard release dates.

AT&T in April brought in Jason Kilar as chief executive of WarnerMedia. Kilar was a founder and CEO of video streaming service Hulu. Hulu is now owned by Walt Disney (DIS).

After theaters shut in March because of the Covid-19 pandemic, studios were forced to either delay their movies or debut them online.

Analysts say AT&T aims to boost HBO Max versus Disney’s streaming services and Netflix (NFLX). Further, Disney holds an analyst day next week and could respond to AT&T’s move.

AT&T says HBO and HBO Max had 38 million subscribers as of Sept. 30, up from 36.3 million in the June quarter. AT&T launched HBO Max in April. During the coronavirus crisis, HBO Max’s growth has lagged Disney’s steaming services.

Warner Bros. Will Take Box Office Hit

In addition, Mitchelson estimates that HBO Max could add 5 million subscribers in 2021 owing to the Warner Bros. strategy.

Craig Moffett, analyst at MoffettNathanson, says Warner will take a hit from an EBITDA (earnings before interest, taxes, depreciation and amortization) standpoint by losing its share of box-office revenue. However, box-office sales will likely be lower in 2021 in any event because of the coronavirus outbreak.

“This decision will be a very costly one for everyone involved: AT&T, participants/rights holders, and theatrical exhibitors,” Moffett said in his note to clients. He added that “Warner Bros, for both film and television, is increasingly becoming a captive studio to HBO Max.”

AT&T stock has dropped 24% in 2020, despite its high dividend. AT&T owns a Relative Strength Rating of only 9 out of a possible 99.

Despite exposure to closed or only partially opened theme parks, Disney stock has gained 6% this year. Disney stock trades above a buy zone, having formed a double-bottom base with an entry point of 131.46.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

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