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HBO and HBO Max reached 47.0 million U.S. subscribers as of the end of the second quarter, up 2.8 million from 44.2 million as of the end of the first quarter, “driven by HBO Max retail subscriber growth,” WarnerMedia parent and telecom giant AT&T said Thursday morning.
That was also up by 10.7 million from the year-ago quarter and exceeded analysts’ expectations for the latest period.
Global HBO and HBO Max subscribers rose from around 63.9 million as of the end of March to about 67.5 million as of the end of June, with international users growing by 760,000 in the latest period. HBO Max launched in Latin America towards the end of the second quarter and also brought to market its advertising-supported service tier that month.
The subscriber figures, which in the U.S. consist of accounts with access to HBO Max, including wholesale subscribers that may not have signed in, and HBO accounts but exclude free trials and Cinemax subscribers, were part of AT&T’s second-quarter earnings report, which also included latest financials for WarnerMedia, led by CEO Jason Kilar.
HBO Max ended June with 12.08 million retail subscribers, up by 2.39 million from 9.69 million as of the end of March and 6.88 million as of the end of 2020. International subs rose from 19.74 million to nearly 20.50 million. Management said on its earnings call that it was looking to delay its HBO Max launches in some European markets into early 2022 to “lean” more into Latin American markets where it has seen “good” early growth.
Wholesale HBO Max/HBO customers, which get the service through Comcast and other distributors, rose from 30.94 million as of the end of the first quarter to 31.45 million as of the end of the second.
Morgan Stanley analyst Benjamin Swinburne in a preview report had forecast 2 million domestic HBO Max subscriber additions for the latest period, “although we note that app download data suggests that may be conservative.” He added: “In contrast to its competitors, which are seeing across-the-board download weakness, HBO Max trends are significantly stronger.”
WarnerMedia raised its year-end 2021 guidance to 70 million-73 million global HBO Max/HBO subscribers from 67 million-70 million. Netflix earlier this week said it has reached 209 million worldwide subscribers, while Disney’s streamer Disney+ has hit about 104 million.
AT&T touted HBO Max, launched a little over a year ago, on Thursday, with Stankey saying his team has transformed HBO from a $6 billion business “that was not growing” to a business with $8 billion run-rate revenue that grew nearly 40 percent in the latest quarter.
AT&T, led by CEO John Stankey, had said in March that HBO Max and HBO would reach between 120 million and 150 million on a combined basis by the end of 2025, up from a previous forecast of between 75 million and 90 million.
Among other data disclosed on Thursday was the fact that domestic HBO Max and HBO average revenue per user amounted to $11.90 in the second quarter, $0.18 from the first quarter. WarnerMedia’s direct-to-consumer subscription revenues rose nearly 40 percent in the latest period.
At the end of 2020, WarnerMedia announced a hybrid release strategy for its 2021 movie slate, making films available on HBO Max for the first 30 days that they are also available in theaters. Films playing into the second-quarter results include Godzilla vs. Kong, which bowed on the final day of the first quarter, The Conjuring: The Devil Made Me Do It and Mortal Kombat.
“For the fourth consecutive quarter, we saw good subscriber growth across wireless, fiber and HBO Max,” Stankey said on Thursday. “HBO Max had another strong quarter and is ahead of plan to be a leading direct-to-consumer streaming platform, with both subscriber- and ad-supported choices. As a result, we’re raising our global HBO Max year-end forecast.”
On the earnings conference call, AT&T CFO Pascal Desroches similarly highlighted: “HBO Max continues to exceed our expectations.”
WarnerMedia’s second-quarter revenue rose 30.7 percent to $8.8 billion, “reflecting the partial recovery from prior-year impacts of the pandemic and driven by higher content and other, subscription, and advertising revenues.” Subscription revenues jumped 21.3 percent, “primarily reflecting 38.5 percent growth of direct-to-consumer HBO Max and HBO subscription revenues following the launch of HBO Max in the year-ago quarter.” Advertising revenue of $1.7 billion was up 48.5 percent “due to the return of the NBA and strength in news.”
Sports contributed about $400 million in ad revenue in the latest quarter, while sports expenses amounted to $1.1 billion, Desroches said.
Overall operating expenses rose 47.3 percent to $7.1 billion, “driven by higher film and programming costs, including sports costs, and marketing,” the company said. WarnerMedia’s overall operating income fell 11.3 percent to $1.7 billion “as higher revenues were more than offset by continued HBO Max investment and higher sports costs.”
Theatrical product revenue amounted to $1.28 billion in the second quarter, up from $1.03 billion in the year-ago period. TV product revenue fell from $1.88 billion to $1.68 billion, while games and other revenue rose from $351 million to $405 million.
In mid-May, Discovery and AT&T unveiled a deal to merge their media and entertainment assets in a combination that will bring together TV channels like CNN, TBS, TNT, HGTV, Food Network and Discovery Channel, the Warner Bros. film studio, and streaming services HBO Max and Discovery+. They said the merger would create a “global leader in entertainment” and “a stronger competitor in global streaming.” Discovery later unveiled the merged firm’s name as Warner Bros. Discovery.
Earlier this month, AT&T disclosed in a regulatory filing that it lost 473,000 premium video subscribers during the second quarter. The preliminary figures for its DirecTV, AT&T TV and U-verse TV services marked the smallest quarterly drop since the fourth quarter of 2018 and compared to a loss of 887,000 in the second quarter of 2020 and 620,000 in the first quarter of this year. AT&T said the figures marked “an improvement of 47 percent” from the aggregate customer loss for the corresponding quarter of 2020. It ended June with a premium video subscriber base of 15.4 million.
AT&T had in February struck a deal to sell a minority stake in DirecTV, AT&T TV and its U-Verse business to private equity firm TPG. The companies will form a new venture, to be called DirecTV, that will own and operate the pay video services. The deal values the unit at $16.25 billion. AT&T will own 70 percent, with TPG holding 30 percent of the new DirecTV. AT&T will receive $7.8 billion from the new venture after the spinoff is complete, including the assumption of $200 million in debt.
Late on Wednesday, AT&T said it would sell Vrio, its DirecTV unit in Latin America, to Argentina’s investment firm Grupo Werthein and take a $4.6 billion impairment charge in the second quarter related to the deal.
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