Measures to prevent password-sharing “abuse” were built into HBO Max during its development, according to John Stankey, CEO of AT&T, which owned HBO Max until its WarnerMedia division merged with Discovery Inc. early this month.
“We were thoughtful about making sure that we give our customers enough flexibility, but we don’t want to see rampant abuse,” Stankey said during AT&T’s first quarter earnings call on Thursday.
“I’m not going to go into all the details, but there were a lot of things and features built into the product that are consistent with the user agreement, that has terms and conditions on how they can and can’t use it,” he added.
These have been enforced in a “customer-sensitive” way, Stankey said. The company actively monitors “how particular users are using the product and have features and capabilities technically to limit what I would call rampant abuse.”
Noting that “You don’t see anyone complaining massively about it,” he described this approach as “the right way for the industry to be managed.”
Netflix, now experiencing subscriber pushback for starting to charge for password sharing, created its streaming service in 2007 — more than a decade before the launches of rival services, including HBO Max. Its reversal of its long policy of tolerating the practice reflects its recent struggles with stalled subscriber growth and intensified investor scrutiny of its financials, including its massive investments in original content.
HBO and HBO Max ended their final quarter under WarnerMedia/AT&T with 76.8 million subscribers worldwide, including 48.6 million in the U.S. The total was up by 3 million versus Q4 2021 and up by 12.8 million compared to Q1 2021.
WarnerMedia revenue in the quarter rose 2.5% YoY, to $8.7 billion, driven primarily by a 4.4% increase in HBO Max and other subscription revenues, to $4 billion. Ad revenue dipped 3% YoY, to $1.7 billion, reflecting linear TV audience declines and comparison to high political ad spending in the year-ago quarter.
AT&T’s revenue of $38.1 billion in the quarter was down 13.3%, reflecting its divestments of part of DirecTV and other “non-core” entertainment assets, as it shifts to focus exclusively on its wireless and broadband businesses.
Net income was $4.8 billion, or 65 cents per diluted common share, down from $7.5 billion in Q1 2021. Adjusted earnings per share were 77 cents, beating analysts’ consensus of 71 cents, but down from 85 cents in the year-ago quarter.
AT&T’s mobile subscriptions growth also beat expectations.
New net subscriptions rose by 5.5 million. There were 965,000 postpaid net adds, including 691,000 postpaid phone net adds.
“We had our best first quarter for postpaid phone net adds in more than a decade and our fiber broadband net adds remain consistently strong,” said Stankey.
The company attributed its Q1 earnings decline primarily to WarnerMedia — specifically, to “investments incurred in launching CNN+ and expanding new territories at HBO Max,” said AT&T CFO Pascal Desroaches.
Yesterday, Warner Bros. Discovery, which absorbed WarnerMedia earlier this month, announced that the month-old CNN+ app will shut down as of April 30.
AT&T’s net debt rose by $12.8 billion versus Q4 2021, to $169 billion. But the WarnerMedia sale will result in about $40 billion in net savings for AT&T this month, according to Stankey.