But, it wasn't profitable before that. HBOMax content creation was supported by cash influx from AT&T. It wasn't in the black to begin with! I mean, let us face it, if Warner and HBOMax were a cash cow, AT&T wouldn't have spun them off!
Well .... that's
complicated.
Look at this chart, for example. Since its inception in 1994, Amazon has almost always operated at a net loss or close to no profit. 2018 was the first year that it really started to record profits.
Obviously, I am using a specific example to make a point- every company claims to be Amazon, and every company hopes that Wall Street will reward the "no profits, all growth" strategy with the assumption that it will pay off. Some times that might be a good bet (Netflix) some times that might be questionable (Uber) some times you might be ... w to the t to the f (WeWork).
I think most people assume that in the future (and after shaking out), there will only be a few big players in the streaming field. And this is a major question going forward- for the tech industry, for Hollywood (and similar areas around the world), for Wall Street, and for consumers. Maybe some niche players (like Shudder) will remain ... but the majority of attention and profits will go to the streamers that dominate the new age (so people think). So far, we are seeing three different models for the major streamers-
1. Integrated Legacy Content Model- This is the Disney+ model (also Paramount, Peacock, etc.). Leverage a large back catalog and existing Hollywood production to continue to pivot to the new streaming world.
2. "Dammit Jim, I'm a Tech Company, Not A Streamer" Model- This is the Amazon Prime / Apple+ model. You're basically subsidizing streaming with the rest of your company. It's an added perk, not the focus of your business.
3. The Netflix Model. There's only one of these- get an early lead, get a lot of subscribers, use the money to build a large library to keep the subscribers, and keep banking on your tech and your name recognition and inertia.
HBO Max was in category 2, but now is category 1. But ... there's a big problem. Two, honestly.
Problem 1- HBO is a huge prestige brand in the US, but not outside of it. Because of legacy reasons, it doesn't have the HBO magic to build on outside of the US (and streaming is global ... ask Netflix).
Problem 2- HBO's greatest asset in its main and most lucrative market (the US) is its prestige. While we talk about the DC Universe, most people in the America discuss HBO in terms of its long run of amazing programming that captures the zeitgeist ... from The Sopranos through Euphoria and White Lotus (not to mention Game of Thrones). HBO has always been the definition of prestige and premium TV. That's a brand. By mixing in Discovery (which is decidedly low brow) and increasing the ad load, they are trying to make it ... mass-tige? That's difficult to pull off. There is not a giant mix of people that go from
Mare of Eastown to
Dr. Pimple Popper.
It's difficult, because I don't think that the current people running it are being very forward-looking. That prestige took decades to build but is easily lost. More importantly, while Discovery has the types of programs that people can put on in the background and they can load with ads ... the "freemium" streaming experience is getting pretty crowded (Pluto, Tubi, Roku, FreeVee, etc.).
(To answer the original question, AT&T spun them off because they realized that they media play that they had made was diverting them from investment in their core profitable business; it's the old push-pull of Wall Street. First, they reward you for buying companies because of the "synergy," then they demand that you divest the companies you have acquired because you'd have a higher stock prices as a pure play. Then again, the investment bankers make money on both transactions ....
).
