HBO and HBO Max added 2.8 million subscribers in the second quarter, reaching 47 million in the U.S. and helping parent AT&T handily beat Wall Street forecasts.
Total AT&T revenue of $44 billion rose almost 8% from the year-earlier period and topped analysts’ consensus estimate of $42.6 billion. Earnings per share went up 7% to 89 cents, well ahead of analysts’ outlook of 79 cents.
At WarnerMedia, revenue surged 31% to $8.8 million in the quarter, which ended June 30, amid comparisons with the 2020 quarter when the company was coping with the worst of Covid-19. Advertising revenue zoomed 49% in the current-year quarter as sports returned to form.
Several Warner Bros film titles scored in the spring quarter, both in theaters and on HBO Max, as the studio continued its day-and-date release strategy. Godzilla vs. Kong, released the day before the quarter began, collected most of its returns during the period, taking in $463 million at the global box office. Mortal Kombat was another notable commercial performer, taking in $83.6 million worldwide. While the talent community and movie theaters initially lambasted WarnerMedia for its release strategy, the results have
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HBO Max, which launched in May 2020 amid the coronavirus pandemic, has now topped 67 million global subscribers. AT&T upped its subscriber guidance to between 70 and 73 million subscribers by the end of 2021. (Previously, the number was 67 million to 70 million.) The company said earlier this year it expected to have between 120 million and 150 million global subscribers by 2025.
In June, HBO Max added a $10-a-month tier with advertising and also began expanding internationally, debuting in Latin America.
“HBO Max had another strong quarter and is ahead of plan to be a leading direct-to-consumer streaming platform,” AT&T CEO John Stankey said in AT&T’s earnings release.
A year ago, at the end of the second quarter of 2020, HBO and HBO Max had 36.3 million subscribers in the U.S. and 55.6 million worldwide. AT&T noted that the domestic HBO/HBO Max subscriber tally consists of U.S. accounts “with access to HBO Max (including wholesale subscribers that may not have signed in).” AT&T has bundled access to the streaming service with several of its wireless and pay-TV subscription packages. In an earlier phase of the rollout, AT&T had stressed the number of “activations” among paying subscribers.
WarnerMedia’s strong performance came as AT&T was announcing a spinoff of the entertainment company into a merged entity to be controlled by Discovery. That deal, revealed in May, is expected to close in the middle of 2022.
Some rivals have attained broader scale than WarnerMedia in the streaming chase. Disney has reached almost 104 million subscribers with Disney+ and Netflix this week reported hitting 209 million globally. But average revenue per user for HBO Max ($11.90, up from $11.72 in the prior quarter) is near the head of the industry class. At $15 a month, it is positioned as a more robust offering, especially with the day-and-date Warner Bros titles, though in 2022 the film slate is due to return to many exclusive theatrical runs before streaming.
Assembling a programming lineup across film and TV does not come cheap, of course. Cash outlays for film and TV increased almost 82% in the quarter, reaching $5.3 billion.
In addition to the WarnerMedia-Discovery plan, the spinoff of DirecTV into a new company in which private equity firm TPG will have a 30% stake, will close in the next few weeks, AT&T said in its earnings report. DirecTV subscribers continue to decline, settling at 15.4 million as of the end of the second quarter, off 13% from the year-ago period.
AT&T has struggled to reduce its massive debt load after swallowing DirecTV and Time Warner. Neither acquisition proved successful, saddling shareholders with tens of billions in losses. As it refocuses on its core telecom operations, AT&T is spending aggressively on 5G technology. The wireless story continues to be strong, with postpaid phone subscribers hitting 65.5 million as of the quarter’s end. Churn of 0.69% was a record low, the company said.