AT&T Strikes Another Blow to Theaters With HBO Max

AT&T’s T Warner Bros. studio announced that its entire 2021 movie slate will be released simultaneously in movie theaters and on HBO Max for the first 30 days, the latest in a string of moves by major studios challenging the traditional movie windows. The move includes blockbusters like Matrix 4 and Godzilla vs. Kong. While management described the move to HBO Max as a pandemic-influenced one-off, we think it may be hard for WB to transition back to the traditional window model, perhaps with the exception of the biggest blockbusters, after conditioning HBO Max subscribers to expect day-and-date releases.

Similarly, Comcast’s Universal used the success of premium on-demand offerings like Trolls World Tour earlier this year to negotiate a new agreement with AMC Theaters to shorten the theatrical window to as little as 17 days. The firm emphasized that 17 days is the minimum window and films could be in theaters and on-demand at the same time. Big-budget blockbusters that do well in theaters could remain there longer. The Universal approach seems more likely to take hold long term than Warner’s, as it allows studios to better tailor release dates to the types of movie-specific audiences. We believe maintaining distribution flexibility is important to maximizing the return on content, and keeping theaters viable is an important part of that flexibility. We expect Disney will leverage the low price point of Disney+ to add premium and free content while the pandemic remains, shifting to a tack like Universal’s when movies return to theaters.

While some elements of the WB move are surprising, especially the commitment to maintain the release strategy through 2021, we believe it is a reasonable response to the pandemic. Longer term, we expect all movie studios to constantly evaluate their plans as consumer behavior changes and priorities shift toward streaming services. We are maintaining our moat ratings and fair value estimates for Disney, AT&T, and Comcast.

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