WarnerMedia, which AT&T bought for $109 billion in 2018, will be cutting thousands of jobs, as the Wall Street Journal first reported. The company issued a statement to the media saying the business will be reorganized to “prioritize growth opportunities, with emphasis on direct-to-consumer…. it will involve increased investments in priority areas and, unfortunately, reductions in others.”

At WarnerMedia, direct-to-consumer means HBO Max, which launched in late May against formidable competition, notably Netflix, Amazon’s Prime Video, and Disney+, as well as Disney-owned Hulu, Apple TV, and smaller streamers; NBCUniversal launched its free Peacock streaming service nationwide on July 15.

HBO Max is the centerpiece of AT&T’s grand bet on content. It’s the service that’s intended to deliver HBO’s top-quality programming, the storied Warner Brothers film library, and more to hundreds of millions of AT&T cellphone customers and cable cord-cutters. The company had announced that HBO Max would launch last fall, but technical and programming challenges postponed the premier by six costly months. By the time HBO Max went live, Disney+ had amassed 55 million subscribers, helped by pandemic lockdowns that kept much of the world stuck indoors and desperate for entertainment.

AT&T has reported HBO Max subscriber numbers only once, when it announced second-quarter earnings in July. The service had 4.1 million subscribers after about a month, the company said. That was not encouraging; HBO Max had automatically signed up the 23.6 million customers who already get HBO through their pay-TV provider, but only 5% of them had downloaded the app. About three million subscribers signed up on their own.

At the same time, Disney+ and Netflix were adding subscribers at unprecedented rates. In early August, Disney+ said it had 60.5 million subscribers, reaching the low end of the range the company had told investors it would reach by 2024. Netflix, with a 13-year head start, had 193 million subscribers worldwide.

Making a tough situation tougher, activist investor Daniel Loeb on October 7 urged Disney to cancel its dividend and redirect that $3-billion annual payout to programming for Disney+. If he’s successful, HBO Max’s competition will become even fiercer.

AT&T CEO John Stankey told Fortune last year, when he was chief of WarnerMedia, that he thought four or five streaming services would survive. “Who is going to win the footrace, establish scale early enough, and be one of the sustaining platforms?” he asked. After HBO Max’s late start and the pandemic’s boost to its competitors, establishing scale early enough has become the central challenge for HBO Max. Thus the new mass layoffs and redirection of investment.

AT&T will report third quarter earnings on October 22, when it will presumably update HBO Max’s subscriber count. Investors, employees, and the entire entertainment industry will be paying rapt attention.