General News

HBO Max Hits 28.7M Subscribers in Q3, Warner Bros. Revenue Down 28%

AT&T touted the expansion of WarnerMedia’s HBO Max premium streamer, with activations greater than doubling in the third quarter to eight.6 million. All informed, 28.7 million prospects had been eligible to get HBO Max on the finish of Q3.

As of the top of September, HBO and HBO Max subscribers in the U.S. collectively reached 38 million, exceeding the corporate’s preliminary year-end goal of 36 million. The numbers present HBO/HBO Max mixed had a web achieve of about 1.7 million subscribers in Q3.

There’s a caveat: In its general HBO Max quantity, AT&T rolls up all subscribers who’re eligible to get it — even when they haven’t watched it. With complete “activations” of HBO Max at 8.6 million, meaning 70% HBO’s current subscribers who’ve entry to HBO Max for no further cost nonetheless haven’t signed in to make use of the super-size streaming service.

Of the 28.7 million determine, 25.1 million HBO Max customers come by means of wholesale agreements (i.e. by means of Comcast, DirecTV, Hulu and others) and three.625 million are direct retail prospects (a rise of 650,000 through the third quarter).

The numbers additionally present that round 9.3 million legacy HBO subs stay ineligible for HBO Max, which boasts 10,000 hours of premium content material — roughly twice standalone HBO. That features prospects who presently subscribe to HBO by means of Amazon Prime Video Channels and Roku. Practically 5 months after HBO Max’s launch, WarnerMedia nonetheless doesn’t have distribution offers for Amazon’s Fireplace TV or Roku.

Media Earnings

AT&T mentioned its funding in HBO Max was about $600 million in the third quarter, with about $1.3 billion plowed into the streaming product year-to-date. Collectively, legacy HBO and HBO Max subs topped 57 million worldwide. WarmerMedia additionally mentioned it’s on observe to launch an advertising-supported model of HBO Max in 2021.

Nevertheless, gross sales in WarnerMedia’s Warner Bros. group had been down 28%, because the movie and TV studio unit continued to undergo results from the COVID pandemic. For WarnerMedia general, AT&T estimated that the coronavirus drove down income by $1.6 billion and depressed EBITDA by $1.1 billion.

AT&T’s DirecTV unit continued to bleed subscribers in huge numbers with complete pay-TV losses of 627,000, though that was a 55% enchancment from an much more disastrous 1.4 million web decline in Q3 2019.

AT&T CEO John Stankey, on the earnings name, famous that the disruption of the sports activities calendar has been onerous on WarnerMedia’s linear channels: “Sports activities content material is essential to our linear enterprise, our cable networks enterprise. It sustains it and retains it a beautiful must-have providing.”

However on the identical time, Stankey signaled that AT&T could be restrained in bidding for sports activities rights pacts as costs proceed to spiral. Actually, his feedback and the stress on AT&T’s steadiness sheet from debt will maintain the conglom out of the bidding for NFL rights — a megabucks negotiation that’s in progress with the league’s incumbent networks.

“Our objective is to not grow to be generally known as ‘the sports activities firm,’” Stankey mentioned. “I don’t see going deeper into sports activities as the proper transfer for WarnerMedia.”

In Q3, Turner boosted Q3 income 5.6%, to $3.2 billion, on larger advert gross sales ensuing from the shift of the NBA season into the third quarter plus larger intra-company income from gross sales to HBO Max. Turner turned in decrease subscription revenues at regional sports activities networks.

HBO’s Q3 income for the third quarter was $1.8 billion, down 2.1% year-over-year, pushed by decrease content material gross sales and decrease licensing income, partially offset by development in worldwide income (primarily as a result of Could 2020 acquisition of the remaining curiosity in HBO Latin America Group and better home direct-to-consumer subscribers). HBO working bills totaled $1.7 billion, up 55.7%, pushed by elevated programming funding associated to the launch of HBO Max. Because of this, HBO’s working revenue margin was 3.4%, down dramatically from 39.3% in the year-earlier quarter.

Stankey informed analysts that on HBO Max, “I might say absent the pandemic the sport has performed out a lot the best way we anticipated it to play out.” The COVID pandemic has “put us in a tricky spot” with HBO Max originals with manufacturing shutdowns, that are the important thing driver of subscriber signups whereas retention is pushed by library titles, Stankey mentioned. General, about 130 of Warner Bros.’ 180 TV and movie productions that had been in progress when the primary wave of coronavirus hit have resumed, he mentioned.

On the plans for HBO Max’s enlargement into ad-supported VOD in 2021, Stankey mentioned that can be “an essential characteristic add-on” given the core HBO Max’s comparatively excessive $15 month-to-month worth level. The brand new AVOD tier — which won’t be free and gained’t serve advertisements in HBO originals — “permits us to not solely broaden the platform providing, at a distinct worth level” but in addition let AT&T and WarnerMedia use it strategically to advertise different services.

Warner Bros. income for Q3 was $2.4 billion, down 27.7% versus the year-ago quarter, pushed by the postponement of theatrical and residential leisure releases in addition to decrease income from TV licensing and productions. Warner Bros. working bills totaled $2.0 billion, down 26.6 p.c versus the third quarter of 2019, primarily as a result of manufacturing hiatus and decrease advertising and marketing bills.

AT&T’s 627,000 complete video subscriber losses had been primarily in its sagging DirecTV unit, which the telco has reportedly been making an attempt to promote or spin off. Complete “premium TV” subscribers (together with DirecTV and the AT&T TV broadband service) had been 17.1 million, down 590,000 sequentially and representing a lack of 3.3 million over the previous 12 months. AT&T TV Now, the telco’s over-the-top service, shrank to 683,000, a lack of 37,000 in Q3 and down 462,000 year-over-year.

General, AT&T income was $42.3 billion, down from $44.6 billion in the year-ago interval, with adjusted earnings per share of 76 cents versus 94 cents in the year-ago quarter. That topped Wall Road estimates for income of $41.61 billion and was in-line with EPS forecasts.

For the quarter, income declines — in addition to these at Warner Bros. — included home video, legacy wireline providers and Latin America on account of overseas change stress. These declines had been partly offset by larger wi-fi gear revenues and better advert income related to sports activities leagues shifting their schedules from the primary half of 2020.

Within the AT&T Leisure group, the corporate posted a report excessive 357,000 AT&T Fiber web provides and 158,000 complete broadband web provides.

Stankey, in his ready remarks, additionally touted AT&T’s wi-fi postpaid development as “the strongest that it’s been in years,” with 1 million web additions together with 645,000 telephones. The corporate expects 2020 free money move to be at lest $26 billion, which “positions us to proceed investing in our development areas and pay down debt,” in accordance with Stankey.

Cynthia Littleton contributed to this report.

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