“Wonder Woman 1984” Helped Double HBO Max Activations, But Warner Revenues Drop

AT&T’s WarnerMedia saw the number of activations on its HBO Max streaming platform double in Q4 to 17.2 million from the third-quarter of 2020, thanks in large part to the success of “Wonder Woman 1984.”

During its earnings call on Wednesday, AT&T said that the total number of domestic HBO Max and HBO subscribers topped 41 million – and nearly 61 million worldwide – a 20% increase from 34.6 million in Q3 2019.

The numbers, CEO John Stankey said, come two years earlier than expected. AT&T invested $800 million in HBO Max in Q4, and more than $2 billion in 2020. HBO Max subscriber growth continues to outpace original estimates, CFO John Stephens said, explaining that both HBO Max and HBO added nearly 7 million total subscribers in 2020 alone.

And the growth came during a Q4 in which WarnerMedia announced in December that it would release its entire slate of theatrical films simultaneously on HBO Max in the midst of the COVID-19 pandemic, including “Wonder Woman 1984,” as the company restructured and focused its strategy around streaming. In Q4, HBO revenue increased to $1.9 billion from $1.78 billion in Q3, fueled in large part by HBO Max subscribers.

WarnerMedia still lags behind rivals like Netflix, which recently surpassed 200 million subscribers, and Disney Plus, which captured 73.7 million. And the company’s theatrical and TV revenue took a $1.6 billion hit due to the COVID-19 pandemic, which impacted AT&T’s revenues across most businesses, particularly WarnerMedia and domestic wireless service revenues.

WarnerMedia’s revenue dropped 9.5% to $8.6 billion, and Warner Bros. fell 21% to $3.2 billion.

AT&T took a $780 million charge related to the impairment of production, which impacted WarnerMedia. $520 million of that charge resulted from the continued shutdown of theaters during the pandemic and the hybrid distribution model for its 2021 film slate.

“We’ve been working through pandemic-related production issues,” Stankey said. “And ramping that back up has been a pretty significant task, and the teams have done a remarkable job getting ourselves back into that business.”

Because AT&T is separating operations of its video business unit from its broadband and legacy voice division, it recast its entertainment group results, which recorded a pre-tax, non-cash impairment of $15.5 billion. The company also reported a net loss of 617,000 DirecTV and AT&T TV premium video subscribers.

But the company said subscription revenues increased 8%, with HBO Max driving organic growth. Additionally, advertising revenues jumped 7% due to political and news advertising, partially offset by declines in sports. WarnerMedia ad revenue increased from $1.07 billion in Q3 2020 to $1.1 billion in Q4. AT&T’s total advertising revenue, which includes Turner and ad tech platform Xandr, increased from $1.6 billion in Q3 2020 to $1.9 billion in Q4.

AT&T expects revenue to grow about 1% in 2021, and Stankey said HBO Max is the company’s “biggest bet” as it uses the platform as a foundation to build broader customer relationships in an increasingly virtual environment. The company is also preparing for the international launch of HBO Max later this year and an AVOD version of the platform that’s slated to roll out in Q2.

AT&T beat earnings estimates by $0.75 per share, according to Nasdaq. Year-over-year revenues totaled $171.8 billion, down from $181.2 billion, while AT&T posted a net income loss of $13.9 million in Q4. Operating income was $34.1 billion compared to $38.6 billion in 2019, a nearly 29% margin.

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