On Thursday April 22, 2021, AT&T reported its Q1 2021 earnings report, fully unveiling the subscribership growth of the HBO Max streaming service, as well as other key metrics for stockholders. This AT&T Earnings Conference Call led to a burst of articles trying to make narratives around these streaming numbers and comparing the Snyder Cut to different Q1 releases such as “Godzilla vs. Kong”.
For instance, Sarah Whitten of CNBC initially reported that the Snyder Cut did not draw enough subscriptions and later substantially modified the article about these numbers with a more neutral headline and positive tone in the article, but Scott Mendelson of Forbes and Graeme Guttmann of ScreenRant had already followed the earlier narrative while sourcing CNBC. Meanwhile, Todd Spangler of Variety was more even-handed in reporting that HBO Max gained 2.7 million subscribers in the first three months of 2021 thanks to “Godzilla vs. Kong” and “Zack Snyder’s Justice League.”
All of these headlines tend to have causal statements about how some particular content, namely “Zack Snyder Justice League”, caused small/big numbers of subscribers into HBO Max. Since my background is teaching causal inference in economics and finance for a living, especially concentrating in analyzing finance data, I felt compelled to discuss some of these headlines and whether these are causal statements that we can make, in particular with the data we have publicly available.
There are two particular points we can discuss that emanate from these articles. First, was the number of new subscribers into HBO Max small or big during Q1 2021? Second, can we link these numbers exclusively to some particular content?
HBO Max numbers
HBO and HBO Max subscribers went up to 44.2 million in Q1 2021. This implied a growth in subscriptions of 6.5% compared to Q4 2020, and an annual growth of 33.5 percent when compared to Q1 in 2020. One can do a finer breakdown of these numbers with more detail and also compare it to the performance from other streaming platforms. In fact, Luiz Fernando on twitter analyzed this breakdown against competitors and also differentiated between subscribers who upgraded to HBO Max, HBO Max retail subscribers, HBO subscribers in the US, HBO subscribers overseas, and total domestic and global combined HBO and HBO Max subscribers.
Another alternative is to also try to implicitly compare it to what financial markets expected these numbers to be. Many financial economists, including myself, choose this alternative to analyze whether some news was good or bad for certain companies. In this case, if these numbers implied good news for HBO Max, one should expect the AT&T stock price to go up immediately after the release of these numbers. Otherwise, its stock price should stay the same or if these numbers are bad or underwhelming for investors, the stock price should decline.
So, what happened to the AT&T stock price after the release of these numbers? On Thursday April 22, after the close of the market AT&T stock was up by almost four percent. We can also compare this performance to the recently released Q1 2020 by Netflix. In comparison, Netflix stock price went down more than seven percent after this release.
Could it be that there was other news by AT&T that is not HBO Max related that is driving the stock price up? This is possible but it is unlikely. When you look at financial news headlines covering the news, they always signal HBO Max as being the driving force behind the increase. So, whichever subscriptions HBO Max added, markets seem to think that Q1 numbers were good for the future profits of the company. So, overall, these appear to be good and relatively big numbers.
Are Q1 2021 subscription numbers due to ‘Zack Snyder’s Justice League?’
Can we confidently link the Q1 2021 relatively good numbers to any particular content? This is where things get muddy with the data we have, which is the number of subscribers for each quarter. Can we confidently say that the Snyder Cut drove these numbers instead of “Godzilla vs. Kong” or “The Little Things” or “Judas and the Black Messiah”? Probably not. We probably could say more about this issue if we had metrics of subscribers that covered day-by-day totals. If the majority of users signed up around March 18 or in the weekend following it, we might associate those subscribers more to “Zack Snyder’s Justice League”. If most of them signed up at the very end of March, they would be more linked to “Godzilla vs. Kong” that came out on March 31.
However, even if we had that data, we would not have a definitive answer. There might be subscribers that signed up because all of these movies and not a single one. This is clearly a problem for the data of Q4 2020 where you cannot confidently say that it was only about “WW1984”. Many people might have signed for the same day release of movies for 2021 that was announced during that quarter. There also might be many people signing in March for the combined possibility of watching “the Snyder Cut” + ”Godzilla vs Kong” + ”Mortal Kombat”, three big blockbuster releases.
There is also one additional issue for Snyder Cut related subscribers. There were three key dates for people that already knew they wanted to watch “Zack Snyder’s Justice League” on HBO Max. First, its announcement in Q1 2020: Several people acknowledging the power of HBO Max in making this movie happened might have subscribed already back in May 2020. Second, the “WW1984” release was also a key data; DC comics fans that wanted to experience more DC content through HBO Max might have subscribed in Q4 2020. And third, you have the actual release of the movie in Q1 2021.
Overall, the point is that with the publicly available data it is almost impossible to make a causal claim that any particular film or television show is alone driving subscriber behavior at any point in time. Do not get me wrong, “Zack Snyder’s Justice League” was more likely than not a factor in contributing to these good numbers. Can we confidently say that it was the only factor, or even the major one? Unfortunately, with the data we have we cannot confidently say that.
This is not to say that HBO Max with their own data cannot find this out. I am sure that their data analytics team is using their private data to try to find out the real demand for each movie, TV project, franchise universe in a way that it is basically impossible to do for us (or any news outlet for that matter). Generally, what we can say is that HBO Max subscriber numbers in Q1 appear to be solid, they might be due to the Snyder Cut, but it is difficult to exclusively link them to any particular movie/content. So do not fall for clickbait titles in either direction.
Are these numbers enough to #RestoreTheSnyderVerse? Adding some context
The big elephant in the room is whether these numbers are enough to warrant additional content in this universe. My view is that the HBO Max subscriber numbers tell us little because we cannot exclusively link them to the Snyder Cut. Ideally, we could combine viewership numbers with subscriber numbers to find out more about the real demand for this universe. However, HBO Max is not reporting any viewership numbers for some reason. In fact, recently HBO Max highlighted that viewership was high for “WW1984”, “Godzilla vs. Kong” and “Mortal Kombat,” but did not mention any specific numbers nor whether the Snyder Cut numbers were close to the numbers from these three brand-new blockbuster movies.
What we can try to do is to add other pieces of available data to try to arrive at an answer of whether additional content in the Snyderverse might be profitable for HBO Max. There has been a host of third-party data available since the release of “Zack Snyder’s Justice League” (which this thread by Carlos Digital covers to a great extent). I believe one important piece of information within this available data that tells us about the potential profitability of this universe is the audience engagement with the content. Streaming platforms are more and more looking for the next “event.” New content that is talked about at length, where word of mouth is the main piece of marketing: the next “The Queen’s Gambit”, “Cobra Kai”, “The Mandalorian” – some kind of series that people are craving to talk about and tell all of their friends that they should watch it.
Of course, gathering data on engagement is very difficult. But one proxy that is used to evaluate interest in a product is Google Trends. So, how does “Zack Snyder’s Justice League” compare to major releases in different streaming platforms? “Justice League” was the most worldwide searched term during its release when you compare it to major releases by HBO Max (including three brand new blockbuster movies), Netflix, and Disney+. There is also additional data from Diesel Labs suggesting a higher engagement for “Zack Snyder’s Justice League” relative to one of most expected DC movies, “Wonder Woman 1984”.
I want to make this clear to add some more context to these numbers. A 4-hour movie with basically no studio push, very little marketing money into it, and considered by many (and probably by the general audience as well), the “extended version” of a failed 2017 movie, appear to have drawn a higher audience engagement than top hits from Netflix, Disney+, and HBO Max. We are talking about Netflix top hits, Disney+ series in the two most successful shared cinematic universes in history, and three brand-new blockbuster movies from HBO Max. Of course, this is only suggestive data from Google Trends.
We can combine this with anecdotal evidence like Jake Tapper tweeting about it, Leslie Jones live-tweeting the whole four-hour movie, and Brad Paisley tweeting #RestoreTheSnyderVerse, in a twitter campaign that got 1.5 million tweets. Just as a comparison, this was more than the tweets generated by “Avengers: Endgame” during its weekend release. In the end, the question that we naturally get is that if an “extended” version of an old movie generated this type of engagement, what is the real demand for new content in this universe? Probably even higher.
Do Google searches and tweets equal profits for HBO Max? No and yes. Of course, not directly, new subscribers and low churn rate are the basis of high income for them. But this type of engagement tells you something about the real demand behind this universe. If HBO Max decides to exploit it, it could bring even more subscribers to its platform, on addition of convincing already existing users to stay in the platform. This is even more evident when you look at the actions of their competitors.
After a high – but lower than “Justice League” – level of engagement for “The Mandalorian”, Disney+ announced “The Book of Boba Fett”. Similarly, after “The Falcon and Winter Soldier”, Marvel Studios announced their Phase 4 slate. Netflix did something similar with new seasons of “Bridgerton” and “Cobra Kai”. The ones for which no sequel was announced (“WandaVision” and “The Queen’s Gambit”) were always supposed to be self-contained miniseries. Amazon Prime announced not one, but two more seasons of their hit animated superhero show, “Invincible”, as the season finale episode dropped.
Income is important but so are costs – The unobservable costs
The potential demand and new subscribers Snyderverse could bring is only part of the equation for HBO Max. Profits, what HBO Max is interested in, are computed as income (stable paying subscribers) minus costs. Some skeptics might argue that this demand will not cover the cost of new and expensive content. Once again, we can compare this with the cost of content in other platforms.
“WandaVision” had a cost of $225 million dollars ($25 million per episode), “The Falcon and the Winter Soldier” was $150 million dollars ($25 million per episode), The Mandalorian was $100 million ($10 million per episode), and “Bridgerton” had a budget of $56 million ($7 million per episode). What would the cost be for Snyderverse related content? It is very hard to estimate and there are a lot of possibilities within new content. Probably the production with lowest cost would be a Deathstroke series. Joe Manganiello stated they pitched Warner a $40 million movie that was rejected. Within a similar range you could think of an Atom or Martian Manhunter miniseries. Probably somewhat in a mid-budget range would be a Batman series with Ben Affleck (probably closer to $100 million). And the most expensive ones would be sequels to Justice League (in the range of $200-$300 million per movie).
One thing is clear from this cost-benefit analysis. Snyderverse related content would probably bring similar engagement levels (or even more) than the Snyder Cut. This is higher than many shows from competing streaming platforms that have already sequels in line. Additionally, there is evidence from third-party data that international demand for the Snyder Cut was strong. This is also crucial as HBO Max is preparing an international rollout launch starting in June with Latin America. Moreover, there is concrete Snyderverse related content (Atom, Deathstroke, Martian Manhunter) that could cost much less than these competing shows that already have their sequels announced. So, based on engagement, third-party analytics, and cost data, one could clearly argue that there is at least some Snyderverse content that could be a profitable investment opportunity as we call in economics and finance projects where their potential income is larger than their expected cost.
Despite the apparent profitability of these projects and the campaigning by movie stars/directors to do them (Joe Manganiello, Harry Lennix, and Zack Snyder for the Ryan Choi/The Atom), no further Snyderverse content has been announced. In the world of economics and finance, when a seemingly profitable investment opportunity is not undertaken, we tend to think that we are miscalculating either the income or the costs. Once again, the engagement numbers seem to point to levels comparable to top franchises, so this is not likely to come from the income part. So, this might be down to the costs part. Which begs the question, are there hidden or unobservable costs that we are not considering?
On this matter, I see two relevant costs for Warner Bros/HBO Max. The first one, which has been discussed, is the cost for some top executives of doing business with Zack Snyder. If top executives (who decide which projects to undertake), for some reason cannot stand Zack Snyder (and probably Ray Fisher), this would be a huge cost for them which could definitely explain no further Snyderverse content. The second one, which has been less discussed, is the potential for Snyderverse content to clash with their plans for the future.
If “The Flash” movie is set to “erase” the Snyderverse from their movie/series continuity, then the cost of doing more Snyderverse content would be huge in terms of explaining why your HBO Max content is clashing with your cinematic universe. Some might counter by saying they are introducing the multiverse in this movie. That might be true, while also being true that they are erasing or resetting what has happened in the Snyderverse universe. I am not saying that this is going to happen, just acknowledging that it could be a possibility. If so, this could be a cost so large that could explain why they are not moving forward with any more content in this universe.
To sum up, after seeing the market reaction to Q1 2021 HBO Max numbers and the level of engagement generated by “Zack Snyder’s Justice League,” it is hard to say that these were in any way bad numbers not warranting additional content. In terms of costs, there are content possibilities that would have low production value that could bring a monetary profit to HBO Max. Thus, a simple cost-benefit logic points to unobserved or hidden costs being important factors if no further Snyderverse content is greenlighted. As a final note, there is very little evidence out there that this is about THE numbers being low enough to not warrant any additional Snyderverse content. So, do not fall for that narrative. More likely than not, this is about something else, something darker.