HBO And HBO Max Add 2.7M Subscribers In Q1, AT&T Reports As It Beats Wall Street Earnings Expectations
On a combined basis, HBO and streaming service HBO Max added 2.7 subscribers in the first quarter, WarnerMedia parent AT&T reported.
The solid returns on streaming helped the telco and media giant beat Wall Street expectations in the quarter. Adjusted earnings of 86 cents a share rose 2% and beat analysts’ consensus forecast of 78 cents.
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Total revenue hit $43.9 billion, up almost 3% and also ahead of the Street number.
HBO Max, the nearly year-old service available at no extra cost to HBO subscribers, propelled the overall HBO number to 44.2 million subscribers. Average revenue per user was $11.72.
Debt continues to be a concern about AT&T among many investors, and the company has struggled to chip away at it since acquiring Time Warner for $85 billion in 2018. Net debt in the quarter rose to $169 billion from $148 billion in the fourth quarter of 2020, largely due to payments related to a C-band spectrum auction.
The company estimates the debt load will be down to $154 billion by the end of the year, noting that it has $11 billion in cash on its books and 90% of the debt has a fixed interest rate. It expects to net $9 billion in proceeds in 2021 due to its repositioning of DirecTV as a private equity backed operation and the sale of anime brand Crunchyroll. The company said it will “continue to evaluate asset monetization opportunities” into the future.
Last year, WarnerMedia decided to prop up HBO Max, which did not gain early traction amid the pandemic, by putting Warner Bros movies on the service at the same time they debut in theaters. The release approach, which stunned Hollywood as well as movie theater operators, will hold true for the entire 2021 slate. Management has explained it as a response to theater shutdowns during the coronavirus pandemic, but the move drew wide condemnation from agencies and talent accustomed to an exclusive theatrical commitment.
The studio’s release of Godzilla vs. Kong has been the biggest at the box office during the pandemic, closing in on $100 million in the U.S. and $400 million worldwide. But the monster movie came out on March 31, the last day of the quarter, so the results reflect the releases of films like Tom & Jerry and The Little Things. One key non-theatrical title, Zack Snyder’s Justice League, was another notable streaming movie in the period.
WarnerMedia reported a 10% gain in overall revenue, to $8.5 billion, which AT&T said reflects a “partial recovery” from the worst of Covid-19. Advertising revenue popped 18.5% due to the return of the NCAA Men’s Basketball Tournament, which the pandemic completely wiped out in 2020. Direct-to-consumer subscription revenue rose 35%.
Content revenues increased, which the company attributed to higher sales to HBO Max for theatrical product and basic networks licensing. Those gains were partly offset by lower TV product licensing from prior-year licensing to HBO Max.
In previous quarters, AT&T had reported an “activations” number for HBO Max — in the fourth quarter of 2020 it was 17.2 million — indicating how many HBO customers turned on their streaming subscriptions. It is now planning to report a combined number each quarter, which is in line with the goals it has set out for HBO Max. Globally, HBO and HBO Max reached 63.9 million subscribers.
Earlier this year, AT&T raised its forecasts for HBO Max, saying it expects 120 million to 150 million global subscribers by 2025, half of them in the U.S. The international rollout is set to begin in June, at the same time an ad-supported tier launches. The current, ad-free version will remain $15 a month for those without an HBO subscription, with expectations for the AVOD version to come in at or just below $10.
The company’s Mobility division reported 823,000 subscriber additions in the quarter, with revenue up 9%.
