HBO Max isn’t the future of movies — but it is a panicked plan

On Wednesday, WarnerMedia, a division of AT&T, announced an innovative plan to bring back the movies as the COVID-19 pandemic continues to kill over 2,000 Americans a day. With vaccine news promising, but the delivery timeline largely eschewing any certainty for general reopening, the movie studio plans on releasing 21 movies—including tentpoles like Matrix 4, Space Jam 2, Godzilla vs. King Kong, and Denis Villeneuve’s Dune — in theaters and directly to its service HBO Max on the same day. The move, which gives each title an unprecedented, one-month streaming run before reverting to theatrical exclusivity, follows the previous announcement to do the same for Wonder Woman 1984. The sequel is due on the service Christmas Day and whichever U.S. theaters will be open in accordance with state guidance, as well as international venues.

The questions on everyone’s mind: What does the release strategy mean for the future of movies? And specifically movie theater venues, which were already on the precipice of massive change thanks to a recent decision by the Justice Department? Theater owners are pleading for relief from Congress, and the nation’s largest chain, AMC Theatres, has lambasted WarnerMedia’s new plan as its stocks took another tumble.

While the anxieties over the “future of movies” are real, predicting its fate will remain somewhat hazy until COVID-19 ends. But the new release strategy gives us insights into what is currently happening inside the halls of WarnerMedia. The real issue at hand is why investors are forcing the company into what ultimately might be a panicked plan.


Let’s back up: HBO Max should be your favorite streaming platform right now. Open the service and you will find a vanguard cable brand, big franchises from Warner Bros., tons of animated properties, and even a solid collection of older and foreign classics all harbored in one location. When HBO Max launched in May 2020, it was poised to be huge.

Except no one signed up. A confusing rollout, the absence of a brand-defining show like Disney Plus’ The Mandalorian, and failures to make deals with Amazon and Roku’s streaming devices out of the gate left the service aching for interest. (The service, it’s worth noting, remains unavailable on Roku.) According to current reports, HBO Max currently has under 13 million subscribers. Despite offering free sign ups to anyone with AT&T’s cellular or internet service, upward of 20 million potential customers have yet to do so.

The HBO Max home screen and My List functions Image: WarnerMedia

To suggest WarnerMedia’s service is lagging behind Disney and Netflix is no surprise. AT&T should be thriving in the pandemic. But HBO Max is floundering, its purchase of DirectTV has only led to massive hemorrhaging in the pay TV sector, and its fallen to third in terms of cellular data plans thanks to the merger between T-Mobile and Sprint.

It is thus only natural AT&T’s investors are done waiting for HBO Max to be a success. Having just eschewed its major activist shareholder and installed a CEO whose new role likely focuses on gutting the conglomerate’s bloat, HBO Max needs to become a clear sign of future growth for its shareholders. This summer, WarnerMedia followed many companies in restructuring toward streaming first, as Tenet’s theatrical failure demonstrated weathering the storm will only lead to capsizing. When the company announced its plans to put Wonder Woman 1984 on the service, it was less about stiff-arming movie theater chains than saving the service. The plan is simple: Trade a billion-dollar global box office hit to throttle subscription sign-ups through the excitement of a new blockbuster fans could watch at home. But will the new customers stay once they’ve tuned in?

Streaming is a weird business. Netflix continually runs a deficit each year, taking their subscription profits and turning them right back into new films and television. The company is now with $14 billion in debt. The “decay effect” of streaming hits, in which most new content is consumed in the first weeks of release and then buried by familiar shows like Friends and The Office, forces companies to essentially overproduce television and film, hoping to continually add subscriptions with the hope that there is no ceiling. Other data crunchers have surmised that streaming profits rarely match those done for traditional film or television models, but investors have continually demanded from Hollywood studios to keep their investments in the new platforms as a priority. All of this reflects the continued “financialization” of Hollywood, where investment firms are looking to reorganize the industry to unlock hidden value (often by using mergers to double dip and other labor cost-cutting measures). A streaming company failing might sound bad until you consider the value of the intellectual property to be divvied off, not to mention the massive data collected.

timothee chalamet’s hand picks up some dune sand
Dune (2021)
Image: Warner Bros. Pictures

WarnerMedia is now betting on a risky model meant to win in the short term. Rather than assume “the library” will keep subscribers, the media company’s appeal will be that no one will hit unsubscribe if they know another blockbuster is due around the corner. A monthly fee of $15 might be double Disney Plus, but unlike the $30 “Premium Access” release of Mulan, users simply need to stay connected. (HBO Max is currently offering a year-long deal that even cuts a few dollars). Investors might sit happy seeing subscriptions rise through 2021. HBO Max may actually compete with Netflix and Disney. But most importantly for the people at the top, the service should also steal cell phone subscriptions from Verizon or T-Mobile and Internet service from Comcast and Charter. AT&T’s advantage, after all, has never been its content than its conglomerated media infrastructure, something even the Trump Department of Justice tried to block. HBO Max’s release plan might have less to do with winning the streaming wars than squeezing the “real” competition.

But if the streaming game requires more debt financing and less profit, what happens in 2022? HBO Max can hope for a Game of Thrones-like hit (or perhaps, literally just more Game of Thrones) to keep people subscribed, but it will soon be facing an uphill battle between throwing out the theatrical business entirely — which is AMC mentions, remains lucrative — or trying to brand its streaming service beyond theatrical titles. And while a $100 million budget might be standard for a blockbuster release, HBO spent less on the final season of Game of Thrones. WarnerMedia promises to share some amount of streaming revenue with possibly both theaters and producers, but what happens to production budgets and profit shares, the percentage of the box office given to top creative talent, when each individual film has lower overall potential in the streaming market?

I’m reminded of the story of Fairway Market, a beloved grocery store chain in New York City. In 2007, a private equity firm made an investment and then loaded debt on the company in the hopes it could transform a local success story into a 200-store chain. Rather than focus on the changing dynamics of online grocery shopping, Fairway found itself trying to simply manage unbelievable debt. The firm walked away with a $100 million profit; Fairway declared bankruptcy before COVID-19 even happened.

AT&T is too big to fail any time soon, but decisions like this one suggest they are less looking ahead to a new version of the industry than the investors at their backs. The future of movies is foggy, but the decisions of a financialized Hollywood are as clear as day.


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