AT&T Q4: HBO Max Activations Doubled, But Warner Bros. Revenue Fell 21%

HBO Max doubled its activations between the end of Q3 and Q4, to reach 17.2 million, AT&T reported on Wednesday.

Total U.S subscriptions to HBO and HBO Max hit 41.5 million — up 20% from 34.6 million in fourth-quarter 2019, and two years ahead of initial forecasts, according to the company, which also noted that the 6.9 million net increase exceeded all of HBO’s combined subscription gains for the past decade.

Worldwide, HBO/HBO Max ended the year with nearly 61 million subscribers.

HBO Max launched distribution deals with Roku and Amazon Fire TV in Q4, but AT&T stressed the role of having simultaneously premiered “Wonder Woman1984” on the streamer and in theaters in driving the activations growth. “WW1984” didn’t debut until Christmas Day, but its coming availability on HBO Max was promoted for weeks leading up to the event.

AT&T’s investment in HBO Max totaled more than $2 billion in 2020, including $800 million in Q4.

During the call with analysts, AT&T CEO John Stankey cautioned that 2020 was a “unique year,” and HBO Max won’t see subscriber spikes like those experienced in December and January going forward.

HBO’s revenue rose 11.7%, $1.9 billion, in Q4.

Stankey also confirmed that WarnerMedia plans to launch a lower-priced, ad-supported version of HBO Max, and is shooting for Q2. Q2 will also mark the start of HBO Max’s international rollout, starting in Latin America.

The new hybrid HBO Max/theatrical release model that bowed with “WW1984” and will be used for all of Warner Bros. films in 2021, was partially responsible for the studio’s revenue dropping 21%, to $3.2 billion, and for AT&T’s overall theatrical and TV revenues declining by $1.6 billion in Q4, the company said. The context, of course, is that some two-thirds of North American cinemas remain closed due to the pandemic, which would have pummeled theatrical sales in any case.

Pandemic-driven production delays also depressed licensing and production revenue.  

On the pay-TV front, the company said AT&T TV subscriber gains helped to offset DirecTV losses, resulting in a combined net loss of 617,000 — an improvement from the year-ago quarter’s loss of 946,000. Still, total premium TV subscribers were down 15.3% for the year, to 16.5 million.

AT&T TV Now, which is being phased out, lost 27,000 subscribers in Q4, ending the year down by 29%, to 656,000.

The video business’s total operating revenue declined 11.2% in the quarter, but its operating margin improved to 1.4%, from 0.5% in Q4 2019, due to expense reductions.

AT&T’s total video connections declined 16%, to 17.2 million, for the year, but its broadband fiber connections rose by 1 million or 27%, to 4.95 million.

AT&T’s total fourth-quarter revenue declined 2.4% YoY, to $45.7 billion, and its earnings per share were down 16%, to 75 cents, but both exceeded analysts’ expectation of 73 cents on $44.55 billion in revenue.

For the year, total revenues declined to $171.8 billion, from $181.2 billion. Operating income dropped 77%, to $6.4 billion, and EPS were 75 cents versus $1.89 diluted EPS reported for 2019.

For 2021, AT&T forecast consolidated revenue growth of about 1% and “stable” adjusted EPS. Analysts had expected 1.4% growth.

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