BUSINESS MANAGEMENT SL IA RESEARCH PROPOSAL

NAME: Muhammad Faiz bin Fuad

CLASS: A20F
(Supporting documents are attached in this document but the links for
the SDs are also provided in GC)
Title
An analysis of AT&T’s HBO Max in relation of its marketing mix and market share in
the Subscription Video on Demand (SVoD) industry.
Research question
Is AT&T's current marketing mix for Hbo Max effective in increasing their sales and
market share in the SVoD industry?
Introduction
AT&T inc. is a multinational conglomerate public limited company founded in
1882 with its original name, American Telephone and Telegraph, by Thomas
Sanders. Since 2017, AT&T is the world's largest telecommunications company 1.
They offer a variety of services such as telecommunications, media, and technology
services2. In the past decade (2010-2020), AT&T completed the acquisition of two
companies which are DirecTV in 2015 for $64 billion and Time Warner in 2018 for
$84 billion, one of the biggest players in the media and entertainment industry 3, now
renamed WarnerMedia. Soon after the acquisition, in 2020, they launched a new
streaming subscription called HBO Max. There are two major problems that AT&T
are facing with the introduction of this service; their debt increased substantially due
to the acquisitions4 and the increasingly crowded subscription video on demand
(SVoD) market5. This means that they desperately need to increase their market
share to increase revenues, but some have said that their marketing strategies are
slightly confusing and weak6. Hence, the research question, ”Is AT&T's current
marketing mix for HBO Max effective in increasing their sales and market
share in the SVoD industry?”
This commentary is done using SWOT analysis, marketing mix and market
share. The SWOT analysis is to assess the company’s internal and external factors
that are relevant to the issue at hand. The market share is to study their position in
the SVoD market. The promotional mix is to evaluate the effectiveness of the current
promotional mix in increasing its market share. Finally, with the integration of all the
1
AT&T Is World’s Biggest Telecom Company After Buying DirecTV. (2021). Forbes. [online] Available at:
https://www.forbes.com/pictures/591b6ecf31358e03e559255f/2017-global-2000-telecom/?sh=64d185f45f2a
[Accessed 23 Apr. 2021].
2
Investopedia. (2021). How AT&T Makes Money: Communications Segment Drives Revenue Growth. [online]
Available at: https://www.investopedia.com/insights/how-att-makes-money/ [Accessed 23 Apr. 2021].
3
Supporting document 4
4
Supporting document 3
5
Supporting document 5
6
Supporting document 2
tools I have listed, I will arrive at a conclusion, which will justify the extent of HBO
Max’s dilemma and answer the research question.
Potential conclusion
Overall, AT&T’s marketing strategies does in fact results in growth, but a slow
one that is. The SVoD market is growing at an exponential rate and the competition
is getting tougher. Therefore, AT&T should review their promotional strategies in
order to tackle every opportunity to grow as fast as their competitors (Disney+ &
Netflix).
Table of supporting documents
Document Title Author Publication Date Type Purpose/reason
Date Accessed
Supporting HBO Max, Georg Apr 22, Apr 23, Article The article gave an
Document HBO Szalai, 2021 2021 update on HBO
1 Reaches Etan Max’s subscriber
44.2 Million Vessing update after they
Subscribers implement their
new marketing
strategy (day & date
release on theatres
& the platform)
Supporting The Launch Gene Del Jul 24, Apr 12, Article Explained the
Document Of HBO Vecchio 2020 2021 marketing missteps
2 Max Had of AT&T during the
Minimal release of HBO Max
Effect On to the public (US
Q2 Due To market only)
Marketing
Missteps
Supporting AT&T INC. AT&T INC. Feb 25, Apr 12, Financia Details on the
Document 2020 2021 2021 l Report financial status of
3 ANNUAL AT&T and the
REPORT external & internal
factors faced by the
company after the
release of HBO Max
Supporting The Time Guilherme Jan 3, 2021 Apr 12, Journal Research on
Document Warner da Cunha 2021 (mostly) everything
4 effect Morgado including the risks
Cacela da and effects of the
Silva acquisition of
TimeWarner by
AT&T
Supporting Netflix is Travis Jan 28, Apr 23, Article Explained the state
Document the Clark 2021 2021 of the SVoD market
5 streaming amidst the Covid-19
leader, but pandemic, have a
its US positive outlook for
market HBO Max, to
share compare the market
shrank in share, size &
2020 as concentration
competitors
like Disney
Plus and
HBO Max
emerged
Supporting Document 1:
HBO Max, HBO Reaches 44.2 Million
Subscribers
WarnerMedia grows the combined sub base of the
streamer and premium outlet by 2.7 million in 2021.
4:12 AM PDT 4/22/2021, Written by: Georg Szalai , Etan Vessing
WarnerMedia’s HBO and HBO Max streaming service — backed by the day-and-
date release of tentpole movies like Godzilla vs. Kong — ended March with 44.2
million subscribers and with a combined 63.9 million worldwide subscribers.

That is up from 41.5 million total HBO Max and HBO domestic subscribers as of
the end of 2020, with direct-to-consumer subscription revenues having risen 35.3
percent year-over-year. A year ago, WarnerMedia had 33.1 million HBO and HBO
Max subscribers and 53.8 million global subscribers.

AT&T did not break out the specific number of subscribers for its HBO Max
streaming platform as it no longer reports "activations," and instead indicates
combined HBO Max and HBO subscriber figures. The telecom giant, led by CEO
John Stankey, disclosed the latest figures in its first-quarter earnings report
Thursday, with overall AT&T revenues rising 2.7 percent to $43.9 billion on
momentum from its core wireless phone business.

"We had another strong quarter of postpaid phone net adds, higher gross adds,
lower churn and good growth in Mobility EBITDA. We also continue to increase
penetration in markets where we offer fiber broadband and we’re moving quickly
to deploy more fiber. HBO Max continued to deliver strong subscriber and revenue
growth in advance of our international and AVOD launches planned for June,"
Stankey said in a statement ahead of a morning analyst call.
For WarnerMedia, first quarter revenues rose 9.8 percent to $8.5 billion, driven by
higher subscription, advertising and content revenues as the media conglomerate
continues to recover from the 2020 impacts of the COVID-19 crisis. Subscription
revenues were $3.8 billion, up 12.6 percent year-over-year, as the subscriber base
for HBO Max and HBO grew.

On the analyst call, Stankey cited WarnerMedia's "success" with its day-and-date

theatrical strategy and a bolstered content slate coming out of the pandemic. He
pointed to Godzilla vs. Kong topping the domestic box office and driving new
subscriptions to HBO Max as the Warner Bros. studio's groundbreaking day-and-
date strategy brings momentum to the streaming platform.

Stankey argued HBO Max was playing to its "strong suit" by touting day-and-date
movie releases to drive subscriber signups. That strategy for WarnerMedia's HBO
Max stirred an early backlash within Hollywood from filmmakers and theater
chains, but the AT&T boss defended the move to give streaming subscribers newly
released films the same day they are in theaters for no extra cost.

At the end of 2020, WarnerMedia announced that it would make all of its films —
including Wonder Woman 1984 and Judas and the Black Messiah — available on
HBO Max for the first 30 days that they were also available in theaters. "You can
all see there's probably a compelling rising tide lifting all boats in this case and we
feel this is the right call for the moment," Stankey said.

Advertising revenues increased 18.5 percent to $1.8 billion after the NCAA
Division I Men's Basketball Championship Tournament returned in 2021 to boost
cable network fortunes. And content revenues increased 3.5 percent to $3.4 billion
on higher sales to HBO Max for theatrical product and higher basic networks
licensing. That was partly offset by lower TV product licensing from prior-year
licensing to HBO Max.
During an investor day in mid-March, AT&T said it expects to reach 120 million
to 150 million HBO Max and HBO subscribers worldwide by the end of 2025, well
above its October 2019 forecast of 75 million to 90 million. It expects to end 2021
with 67 million to 70 million subscribers worldwide, up from about 61 million at
the end of 2020.

The company back then also said that an advertising-supported version of the
streamer would launch in the U.S. in June and that HBO Max would become
available in 60 markets outside the United States this year. "We just think it's a
really smart place to be for that segment of the market," Stankey said of the
upcoming AVOD offering of HBO Max as WarnerMedia targets price-sensitive
consumers.

"When there are multiple streaming services out there, people are making decisions
to reorder their investment in home entertainment and are going to be more price-
sensitive," he added.

Consumer interest in HBO Max started picking up heading into the final months of
2020 when WarnerMedia struck a distribution deal with Amazon and featured a
lineup that included buzzy original series The Flight Attendant and HBO limited
series The Undoing. WarnerMedia also signaled the importance of HBO Max to its
long-term strategy when it unveiled a hybrid release strategy for Wonder Woman
1984, premiering it in theaters where they were open and on HBO Max in the U.S.
on Christmas Day.

Supporting Document 2:
The Launch Of HBO Max Had
Minimal Effect On Q2 Due To
Marketing Missteps
Written by: Gene Del Vecchio

BURBANK, CALIFORNIA - OCTOBER 29: John Stankey, President & Chief Operating

Officer of AT&T and ... [+]

The positive spin that AT&T T +0.7% put on the launch of HBO Max does not reflect the

reality of the Q2 results. On Thursday the CEO of AT&T, John T. Stankey, stated that, “HBO

Max had a strong launch, on track to hit its targets we laid out for you last fall,” and that the

launch was “flawless.”

Perhaps the company lowballed expectations, but the results also reek of missed

opportunities.

While the report touts that HBO Max gained 4.1 million subscribers in one month, it barely

slowed the bleed experienced by the traditional HBO. Combined, the traditional HBO and

HBO Max finished the quarter with 36.3 million U.S. subscribers, up only 1.7 million (4.9%)

from the 34.6 million at the end of 2019. The 4.1 million new subscribers all but vanished by

the decline in cable and satellite subscribers. Worse, operating revenue fell for the combined

HBO by 3.2% for the six-month ending. While AT&T states that HBO Max is on track to have

about 50 million U.S. subscribers by 2025, many of those will likely be traditional HBO

subscribers who jump to HBO Max, so the net adds may be only 14 million subscribers or so

from today’s 36.3 million.

Disney Plus gained 10 million subscribers in one day and 54.5 million subscribers in the first

six months. That’s what success actually looks like.

HBO is a great brand built upon great premium content, but the launch stumbled badly due

to an array of marketing missteps that violated core marketing principles.

The HBO Max launch had grossly inadequate distribution. I started my marketing

career at General Mills GIS -0.7% where I often heard, “We don’t market to empty shelves.”

That means you don’t spend a dollar on marketing until your product has ample distribution

so that your customers can buy it. HBO Max is not available via Roku or

Amazon AMZN +2.2% Fire which combined represent roughly 70% of U.S. streaming

households, leaving HBO Max to scramble for the remaining 30%. As a guesstimate, had

AT&T made the deal with these services, the 4.1 million HBO Max subscribers might have

been as many as 13.7 million. The difference (9.6 million) may have generated an added

$1.73 billion per year of which HBO would have taken a substantial cut from Roku and

Amazon. Success and failure is not only measured by gains, but also by opportunity lost.

There are reasons why AT&T has not done the deal with Roku and Amazon Fire, mostly

related to a dispute over money, pathways, and ownership of customer data. AT&T feels that

other streaming services have gotten better deals. While they are probably right, being

justified is sometimes deadly if it results in stalled negotiations in an environment where

more accessible streaming services are expanding rapidly.

Unfortunately, AT&T can be stubborn when it comes to contract negotiations. Ask any

Dodger fan, most of whom could not see the Dodgers play on local television because of a

bitter, six-year plus contract battle between AT&T’s DirecTV unit and Spectrum, the local

sports network. It took the U.S. Justice Department to resolve the dispute. HBO Max does

not have that much time to waste because consumers may have little money left for a fourth

or fifth streaming service.

HBO Max is over-priced relative to streaming competition. HBO Max is offered at

the same price as the legacy HBO at $14.99. That premium price made sense when it was a

truly breakthrough cable channel compared to broadcast television whose restrictions made

them unable to provide edgier cable shows like The Sopranos and Sex and the City. But

today’s streaming services can offer compelling, premium content unique to them. Offered at

only about $7 per month, Disney Plus has an extensive catalog of premium content that

includes existing and new content from Marvel, Star Wars, Pixar, and Disney Animation.

Offered at about $13 for the standard plan, Netflix NFLX +3.4% offers premium shows
like The Crown, Stranger Things, and Ozark. NBCUniversal’s Peacock has arrived with a

free, ad-supported version giving access to its premium library.

HBO’s premium image is no longer as distinctive in this new competitive set, at least not

enough to justify such a large price differential. The higher price is even more problematic

with the high unemployment rate generated by the pandemic. As a guess, its non-

competitive price may have suppressed potential by another 10%-20% over its distribution

flaw cited above.

HBO Max was hampered by confusing array of HBO sub-brands. Consumers are

likely confused over the various HBO offerings that include HBO, HBO Go, HBO Now, and

the new HBO Max. Stankey acknowledged the issue stating that, “We still have work to do to

educate and motivate.” But a plan should have been in place to address this issue before the

launch. Adding to the confusion is how and when consumers from these older sub-brands

can transition to HBO Max, made more difficult because many subscribers are connected

through services like Roku and Amazon Fire that do not offer HBO Max. Preparing for

unintended consequences is the hallmark of great marketing.

The HBO Max advertising campaign was weak. The HBO Max tagline of, “Where

HBO meets so much more” was clearly an understandable attempt to marry the HBO content

we know (e.g. The Sopranos, Sex and the City, Game of Thrones) with the Warner and

acquisition side of the portfolio (e.g. Wonder Woman, Friends, Big Bang Theory). But the

commercials became more instructive than benefit oriented, and they came across as an

abundance of unrelated content that did not exist under a unified banner.

Importantly, while the “Max” element of HBO Max is a great promise, it is never developed

in the advertising. A better unifying idea would have been to use the “Max” element as a

unifying element. Example - “HBO Max has drama to the max…comedy to the max…horror

to the max…friendship to the max…romance to the max,” and then show relevant content

within each segment. Brand-wise, the launch campaign was a branding miss that could have

suppressed potential by another 10%. My many years as a chief strategist at a global

advertising agency tells me so.  

HBO was late to the party. Research suggests that consumers only will pay for 3 to 5

streaming services. Being late to enter the streaming wars is particularly problematic given

that Disney Plus nearly slammed the door shut behind it. Being early in this environment

with a less-than-ideal plan is far better than being late with an ideal plan. The key is to get as

many customers as fast as possible.

Being late also put HBO Max behind the curve in delivering new content. An abundance of

new shows turned into fewer when COVID shut down production. It is new programming

that often generates the most interest among potential subscribers.

The saving grace is that HBO has great content. The library is impressive, and all 6 of

its new shows landed in the top 25 viewed series on the platform. I am a fan of Love Life with

Anna Kendrick. By August, HBO Max intends to have another 21 new original series.

I am hoping for the best because I love the HBO brand, and so my notes are tough love in

hopes it will achieve its potential. But to do so, management needs to rethink its marketing

approach to HBO Max. It needs to get the deal done with Roku and Amazon Fire to gain

access to the majority of households, it needs to rethink its price strategy, it needs to better

communicate its migration path to current subscribers of HBO sub-brands, and it needs a

better advertising campaign that puts the “Max” back into HBO Max. And it needs to move

fast.

Hopefully, management doesn’t believe its own hype and recognizes that given the potential,

the launch of HBO Max was actually unsuccessful.

Supporting Document 3:
Supporting Document 4:
A Work Project, presented as part of the requirements for the Award of a Master
Degree in Finance from the NOVA – School of Business and Economics.
The Time Warner effect
Guilherme da Cunha Morgado Cacela da Silva
25720
A Project carried out on the Master in Finance Program, under the supervision of:
Nuno Vasconcelos e Sá
3rd of January, 2020
Abstract
Acquired in 2018, Time Warner (renamed WarnerMedia), is expected to be one of the main
growth drivers for AT&T, through its subsegments and by providing content data for digital
targeted advertising. However, some important risks may oppose to the $85 billion
acquisition, such as the possibility of HBO Max not being able conquer its space in the SVoD
market, or AT&T fail to reimburse its debt.
After computing a valuation on the telecom firm without WarnerMedia, it was possible to
conclude that AT&T is still being undervalued but would be worse off without the media and
entertainment segment.
Nevertheless, the firm as incurred in higher risks, which, ultimately, are reflected in its cost
of capital. Hence, AT&T is now more vulnerable, meaning that, if the firm’s operations do
not follow with what was predicted, it might enter in a difficult situation where it will
struggle to meet its financial obligations.
AT&T, WarnerMedia, Scenario analysis
This work used infrastructure and resources funded by Fundação para a Ciência e a
Tecnologia (UID/ECO/00124/2013, UID/ECO/00124/2019 and Social Sciences DataLab,
Project 22209), POR Lisboa (LISBOA-01-0145-FEDER-007722 and Social Sciences
DataLab, Project 22209) and POR Norte (Social Sciences DataLab, Project 22209).
The acquisition
By June 2018, AT&T completed the acquisition of Time Warner, one of the biggest players
in the media and entertainment industry. For a total value of $84.5 billion1, the telecom
company now owned Turner, the international multichannel owner and operator, Home Box
Office, a premium paid television services, and WarnerBros., producer and distributer of
television shows, films and games. Regarding this acquisition, it is expected to provide new
streams of revenue, outside AT&T’s traditional segments like the U.S. wireless business.
Furthermore, the main expected value-added driver is the development of AT&T’s digital
targeted
1 AT&T’s website
advertising structure. The acquisition allowed the firm to gain access to a broad set of
viewership and data analytics, which are crucial for the targeted advertising market. Hence,
the firm can now enable advertisers to target TV ads, and so develop its position in a market
where these ads can be sold by three time the price of regular ads 2. Such market is almost
fully dominated by Google and Facebook.
The other expected main growth driver is Time Warner (renamed WarnerMedia) itself. The
media and entertainment company has proven to be a profitable company throughout its three
segments and prospects are that it keeps such trend. More specifically, the segments of
Turner and Home Box Office are the ones with higher expectations3.
Turner comprises a set of channels like TNT, TBS, Adult Swim, TruTV, Cartoon Network,
CNN, among others, and produces and distributes successful contents such as ‘Rick &
Morty’ and Conan O’Brien’s show. This successful performance in the broadcasting TV
market is expected to be maintained, thus resulting in significant growths for the next few
years.
Home Box Office, by 2020 will be launching HBO Max, its new streaming on demand video
(SVoD) service, which will comprise a diversified set of contents, including originally
produced and other WarnerMedia contents (from Turner and WarnerBros.). Coupling the
extensive set of successful contents that will be available in the platform with the
expectations for the SVoD market, it is projected that HBO will end up highly benefiting
from this and drive growth for the company.
Associated risks
In 2015, AT&T acquired DirecTv for $67 billion4, a paying TV service company. With Time
Warner’s acquisition, the company also intended to add support and boost the 2015’s
acquisition. Additionally, the telecom firm means to become able to compete with giant tech
companies such as Netflix, YouTube and Amazon prime.
Nevertheless, there is the risk that AT&T is already late to enter in this market, and having
made two significant acquisition aggravates the loss risk of the company if its mergers’
strategies do not work. As referred, HBO Now is predicted to be one of the main growth
drivers for WarnerMedia, and producing original contents is one of the key actions to boost
it. Nonetheless, it is important to highlight that HBO does not standalone. In 2018, Netflix
spent $12 billion in original content 5, Apple committed to spend $4.2 billion until 2022 6 and
YouTube is also betting more and more on original content, launching new YouTube’s
originals. Hence, there is the risk that HBO may be late on entering this market and investing
in original contents may not be enough to get near to its competitors.

2 FierceVideo: “AT&T: Addressable advertising CPMs up to $40, 3x traditional ads”

3 Variety: “WarnerMedia Drives AT&T Growth in Q2, as HBO and DirecTV Lose Subscribers”; Analyst estimates

4 AT&T’s website

5 Variety: “Netflix Spent $12 Billion on Content in 2018. Analysts Expect That to Grow to $15 Billion This Year” 6 CNBC: “Four reasons
why losing Time Warner would be good for AT&T”
6 CNBC: “Four reasons why losing Time Warner would be good for AT&T”

Finally, to finance another acquisition, the firm had to get new debt. As so, its net debt
increased from around $125 billion to more than $175 billion, increasing the net debt to
EBITDA multiple from 2.5x to 3.3x7. Thus, despite tax shield benefits that arose with more
debt, in a scenario where the acquisition’s strategy fails, AT&T may be in big trouble to
turnaround the situation and meet its financial obligations.
No acquisition scenario
The acquisition exhibits the main expected benefits of the development of AT&T’s digital
targeted advertising structure and Turner’s and HBO’s outstanding performing. However, it
also displays important risks, like the failure on the strategy where HBO would not be able to
gain enough market share and AT&T would get stuck with a significant amount of debt.
Henceforth, to measure the impact of these situations it was developed a valuation in a
scenario where Time Warner was not acquired, to infer how much would AT&T be worth in
this case.
Hence, the whole WarnerMedia segment performance and the respective balance sheet
captions were not considered for the cash flows. Moreover, with not having access to the
valuable viewership and data analytics that WarnerMedia would provide, revenue forecast
growth exhibited more modest growths, specially in the segment of Xandr. Finally, the debt
amount was adjusted, reflecting a value that is more in line with the firm’s target, resulting in
a net debt to EBITDA multiple of 2.6x7. Furthermore, AT&T’s cost of capital was also
adjusted. The telecom market displays a lower associated risk than the media and
entertainment one. Thus, return on debt decreased by 0.1 p.p., since now the firm is not liable
to the riskier debt that WarnerMedia had (while the weighted average YTM of AT&T’s
bonds was 2.8%, WarnerMedia’s was 3.5%), exhibiting a value of 2.9%. Additionally, return
on equity decreased from 5.8% to 5.6%, as beta equity of AT&T was 0.6 and WarnerMedia’s
0.9, reflecting a less volatile and exposed to market’s fluctuations7.
As a result, the WACC also decreased. While with WarnerMedia the WACC was predicted to
be 4.5%, now it decreased to 4.2%7. Hence, by not being exposed to a more volatile market
that is media and entertainment coupled with no significant increase in its debt values,
AT&T’s cost of capital decreased. The implied growth rates of the firm, as expected, were
more modest, since operational ROIC and reinvestment rate are generally lower, resulting in
a terminal growth of 0.76%, 0.1 p.p. lower when compared to the scenario with
WarnerMedia.
For the valuation it was used the Discounted Free Cash model (DCF). According to this
model, and considering the referred inputs, the implied EV is predicted to be $521 billion and
the financial debt $262 billion. Thus, implied equity value is projected to be $259 billion, $73
billion below the alternative scenario7.
Afterwards, to compute the share price it was considered the number of shares outstanding at
the date before Time Warner’s acquisition, since after that shares outstanding increased, since
part of the $85 billion were paid with shares. Thus, with $6.2 billion outstanding shares, the
share price for end 2020 is expected to be $41.85, reflecting a decrease of 8%, compared to
the alternative scenario7.
7 Analyst estimates

Final conclusions
After computing the DCF valuation, it is possible to realize that, when analysing the
predicted share price for the telecom firm, shareholders would be better off with the
acquisition of Time Warner.
In this scenario, despite slower growths, it is still predicted that the firm, overall, grows
throughout the analysed period. The main growth driver, in this situation, is the
implementation of 5G.
The Mobility subsegment, included in the segment of Communications and where 5G will
have the most impact on, alone, accounts for around 40% of total AT&T revenue.
The firm is currently the leader in the US telecom market and has been preparing to be one of
the first to launch the 5G technology in the country. Additionally, just like 3G and 4G, this
new tech is expected to disrupt the market, as it will facilitate digital communications among
users, due to a faster and higher quality connection. Moreover, 5G will enable devices, like
routers, to become even more wireless8.
AT&T, being a market leader and a pioneer in a new technology that will be launched and
expected to drive growth for the industry, is predicted that will improve its performance
throughout the forecast period. Hence, the valuation computed suggests that, up to today and
even without WarnerMedia’s effect, the firm’s share price is undervalued, providing a HOLD
recommendation, as the 12-month expected return, including capital gains and dividend yield,
is around 6.9%7.
In addition, a sensitivity analysis was conducted to the predicted share price for end 2020.
The variables chosen were the WACC and perpetual growth, to measure how changes in
these inputs could impact the firm’s stock price. On the variable growth, its inputs - ROIC
and reinvestment rate - were the ones changed, ultimately changing growth. Overall, it is
possible to conclude that the analysis supports the previously given recommendation, since
nine out of the 25 results suggest a HOLD recommendation, while the same goes for the
BUY recommendation and the remaining seven providing a SELL recommendation7.
In conclusion, it is possible to realize that acquiring Time Warner was/will be beneficial for
AT&T. Despite still being undervalued, when analysing the firm without WarnerMedia
(according to the valuation conducted), the referred segment is predicted to provide higher
growths through new streams of revenue, either by its own segments or by digital targeted
advertising. Hence, one can say that the expected benefits of the acquisition outcome the
associated risks.
Notwithstanding, it is important to highlight that, if the actual performance of the segment is
not in line with forecast, lowering the firm’s expected growth significantly, AT&T may
struggle to reimburse its debt. Hence, such risk should be reflected in the predicted share
price, mainly through a higher cost of capital.
8 Deustche Bank: “How 5G will change your life”

Supporting Document 5:
Netflix is the streaming leader, but its US market share
shrank in 2020 as competitors like Disney Plus and HBO
Max emerged
Written by: Travis Clark

Jan 28, 2021, 12:03 AM

 The US streaming market grew 23% in 2020, according to analytics

company Antenna.
 Netflix accounted for 34% of that in Q4 2020, the most of any streamer,
but fell from 40% in the same quarter in 2019.
 New streaming services like Disney Plus and HBO Max have emerged to
eat into Netflix's market share.

The streaming market boomed in 2020 amid the coronavirus pandemic. 

New research from analytics company Antenna shows that the market grew 23%
overall last year in the US and 8% from the third quarter to the fourth quarter thanks
to the emergence of new players like Disney Plus, which debuted in November 2019,
and WarnerMedia's HBO Max, which launched in May 2020.

Antenna pulls from a variety of opt-in panels like budgeting apps to track purchase
and transaction data, which doesn't include free trials.

Netflix is still the champion by a wide margin, with 34% of the US market, followed
by Hulu with 20%, according to Antenna. In its most recent earnings report, Netflix
passed 200 million subscribers worldwide. Around 67 million of those are in the US.

But the crowded streaming space means that its share shrank over the course of the
year. In the fourth quarter of 2019, Netflix accounted for 40% of the market. By Q3
2020, it was at 36%. 

Below is where each major streaming service stands in market share in the US as of
Q4 2020, according to data from Antenna:

 Netflix — 34%
 Hulu — 20%
 Disney Plus — 18%
 HBO Max — 10%
  CBS All Access (becoming Paramount Plus in March) — 6%
 Starz — 6%
 Showtime — 4%
 Other (Peacock and Apple TV Plus) — 2%

NBCUniversal's Peacock had 26 million sign-ups as of early December, but Antenna's

data suggests that the majority of those are not paid subscribers (the service includes
a limited free tier along with two paid subscriber tiers). It also suggests that the vast
majority of Apple TV Plus subscribers are taking advantage of the free trial, which
Apple recently extended to July.

Disney Plus had gained nearly 87 million subscribers as of December. Rich

Greenfield, an analyst with research company Lightshed Partners, estimated
that around 33 million of those are in the US. At the pace it's going, it will likely soon
pass the Disney-owned Hulu, which had 39 million subscribers as of December.

"Disney Plus is closing the gap quickly and it's remarkable," Steve Nason, the Parks
Associates research director, told Insider in November. He had projected Disney Plus
to surpass Hulu in the US in the first half of 2021.

Max is growing after a rocky start

After a shaky launch, HBO Max is showing signs of life and now accounts for 10% of
the US streaming market, according to Antenna. It finished 2020 strong with 17
million activations in the US (it's not yet available internationally), WarnerMedia's
corporate parent AT&T said on Wednesday, up from 12 million in early December. 

HBO and Max now have a combined 41.5 million subscribers, so Max is still
struggling to convert a large portion of HBO customers. But its growth in the final
months of 2020 could signal a positive 2021. One big factor that likely helped was
that WarnerMedia finally closed deals with the largest streaming distributors,
Amazon and Roku, after months-long standoffs.

And the Warner Bros. movie "Wonder Woman 1984" debuted on Christmas Day,
which AT&T CEO John Stankey said on Wednesday "helped drive our domestic HBO
Max and HBO subscribers to more than 41 million, a full two years faster than our
initial forecast."

Antenna data earlier this month showed that "Wonder Woman 1984" drove 4.3 times
the amount of sign-ups as the average for the previous three weekends in December.

Max will look to replicate the movie's success throughout 2021, as every Warner
Bros. movie is set to debut on Max at no extra cost to subscribers the same day they
arrive in theaters, including tentpoles like "Godzilla vs. Kong" and "The Suicide
Squad." They will stream for 31 days before leaving the service for an exclusive
theatrical run.

The move has caused a stir in Hollywood, but as the pandemic continues to cripple
the theatrical industry, legacy media companies like Warner are looking to boost
their streaming businesses.