HBO Hits 28.7 Million Subscribers in Q3, Warner Bros. Revenue Down 28%

AT&T touted the growth of WarnerMedia’s HBO Max premium streamer — with activations more than doubling in the third quarter to 8.6 million, to reach 28.7 million total.

As of the end of September, HBO and HBO Max subscribers in the U.S. together reached 38 million, exceeding the company’s initial year-end 36 million target. The numbers show HBO/HBO Max had a net gain of about 1.7 million subscribers in Q3. That means the majority of HBO’s existing subscribers still have yet to access HBO Max content even though it is free to those who already pay for HBO.

Together, legacy HBO and HBO Max subs topped 57 million worldwide. WarmerMedia also said it’s on track to launch an advertising-supported version of HBO Max in 2021.

However, sales in WarnerMedia’s Warner Bros. group were down 28%, as it continued to suffer effects from the COVID pandemic, and AT&T’s DirecTV unit continued to bleed subscribers in massive numbers.

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In announcing Q3 results, AT&T CEO John Stankey said “we continue to grow and scale HBO Max, with total domestic HBO and HBO Max subscribers topping 38 million — well ahead of our expectations for the full year.”

HBO revenues for the third quarter of 2020 were $1.8 billion, down 2.1 percent versus the year-ago quarter, driven by lower content and other revenues resulting from lower licensing revenues, partially offset by growth in international revenue primarily due to the May 2020 acquisition of the remaining interest in HBO Latin America Group and higher domestic direct-to-consumer subscribers. HBO operating expenses totaled $1.7 billion, up 55.7 percent versus the third quarter of 2019, driven by increased programming investment related to the launch of HBO Max. HBO operating income margin was 3.4 percent compared to 39.3 percent in the year-earlier quarter.

Warner Bros. revenue for the Q3 was $2.4 billion, down 27.7% versus the year-ago quarter, driven by the postponement of theatrical and home entertainment releases as well as lower television licenses and productions revenues. Warner Bros. operating expenses totaled $2.0 billion, down 26.6 percent versus the third quarter of 2019, primarily due to the production hiatus and lower marketing expenses.

AT&T posted total video losses, primarily in its DirecTV unit, of 627,000, although that was an improvement from a 1.4 million total video losses in Q3 of 2019.

For the quarter, revenue declines — in addition to Warner Bros. — included domestic video, legacy wireline services and Latin America due to foreign exchange pressure. These declines were partly offset by higher wireless equipment revenues and higher advertising revenues associated with timing shift of sports from the first half of 2020.

Overall, AT&T revenue was $42.3 billion, down from $44.6 billion in the year-ago period, with diluted earnings per share of 39 cents versus 50 cents in the year-ago quarter. That topped Wall Street estimates for revenue and was in-line with EPS forecasts.

In the AT&T Entertainment group, the company posted a record high 357,000 AT&T Fiber net adds and 158,000 total broadband net adds.

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