UPDATED with executive comments AT&T CEO John Stankey told investors on the company’s first quarter earnings call that the company’s focus on HBO Max is paying dividends. But he declined to offer any updated metrics or insights about the streaming service when pressed by analysts.
The streaming service, which launched last May, added 2.7 million subscribers in the quarter along with regular HBO, reaching a total of 44.2 million.
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While Godzilla vs. Kong drew the largest viewing audience of any other show or film on HBO Max since launch, the company did not offer any numbers. Asked by analysts for additional insights and metrics, Stankey declined to offer any.
“We’re not going to give you any more guide publicly than what we gave you at analysts’ day,” Stankey said, referring to AT&T’s March 12 event. “I don’t want to get into a kind of every-five-weeks update of those numbers. I think we gave you a good sense of what’s happening. We’re well above two hours per day per account,” which is above internal forecasts.
In terms of customer behavior once they come to HBO Max, Stankey said, the patterns are similar to those on other subscription streaming outlets. “We clearly have a good reason for them to come in,” he said, noting the Warner Bros day-and-date theatricals as a draw.
The call featured brief prepared remarks of less than 20 minutes, with another 40 minutes dominated by discussion of broadband, wireless and other non-WarnerMedia topics.
PREVIOUSLY: On a combined basis, HBO and streaming service HBO Max added 2.7 million 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.
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. Of the 44.2 million total subscribers, about 9.7 million were designated as retail, meaning customers who came in through distribution partners like Roku, Apple TV or dozens of others.
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 spinoff of DirecTV and sale of 30% of it to private equity firm TPG and the sale of anime brand Crunchyroll. The company said it will “continue to evaluate asset monetization opportunities” into the future.
The decision to get DirecTV off the balance sheet is looking better and better. Overall video subscriber totals, including DirecTV and U-Verse cable dropped 15% in the period to 15.9 million. When AT&T acquired DirecTV in 2015 for $49 billion, it had 20 million subscribers.
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 promote a combined number each quarter, which is in line with the goals it has set out for HBO Max for investors. 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%.
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