HBO owner AT&T saw its profit sink in the second quarter as the coronavirus crimped advertising revenue in its entertainment division and accelerated the decline of its satellite TV business.
The telecom and media giant said COVID-19-related issues cut into earnings by $830 million, including a 22.9 percent decline in revenue from its WarnerMedia entertainment division, thanks to fewer ads and a halt in movie ticket sales. Earlier this week, Warner Bros. indefinitely suspended “Tenet,” its big-budget spy film that was earmarked for a summertime release.
On Thursday, AT&T Chief Executive Officer John Stankey, said “Tenet” and the upcoming “Wonder Woman 1984” are still destined for the big screen, but other movies will likely be pushed directly to its new streaming service, HBO Max, until people return to the theaters.
“There’s no question the longer this goes on there’s going to be some content on the margin that we look at and say that it might be better served to be distributed in a different construct,” Stankey said.
Overall, AT&T reported and adjusted earnings per share of 83 cents on revenue of $41 billion, down from $45 billion in the year-ago quarter. The results were largely inline with Wall Street’s diminished expectations for a profit of 79 cents on revenue of $41.1 billion, and shares fell just 1 percent in midday trading to $29.85 a share.
AT&T also said it lost 151,000 mobile phone subscribers, which included the loss of 338,000 customers who stopped paying but were kept on the network as part of a federal program to keep Americans connected to wireless networks during the pandemic. Analysts had expected the company to add 6,800 subscribers, according to FactSet.
It also reported continued hemorrhaging at its satellite TV business, DirecTV, and other pay-TV services. Total premium subscribers now stand at 17.7 million, which translates to a 886,000 net loss.
The company also reported meager subscriber growth for HBO Max, it’s answer to Netflix, Amazon Prime and other streaming video services that have become a main distribution channel for watching TV and movies, especially since the pandemic hit.
AT&T reported 36.3 million US subscribers for HBO Max, which launched May 27, and its pre-existing HBO streaming service as of June 30. That’s up from 34.6 million as of December 31, 2019, which translates to a 1.7 million increase for the combined services in the last six months.
Stankey, the architect behind HBO Max, lauded his team on Thursday for a “flawless launch” of the product executed in the midst of the coronavirus pandemic. And he said HBO Max is on track to reach its US subscriber goal of 50 million to 55 million by 2025, and boasted that “customer engagement has exceeded our expectations.”
Still, he also acknowledged setbacks, including the company’s continued failure to get its new streaming service on Roku and Amazon Fire, which make up more than two-thirds of the US streaming market.
As The Post has previously reported, the problem appears to lie with AT&T’s pricing model. HBO Max offers content across MediaWarner channels, including HBO, Cartoon Network and Turner Classic Movies — all for the same $14.99 price as HBO. That has HBO distributors griping that AT&T needs to either lower the price of HBO or allow customers to upgrade to HBO Max for free.
“We still have work to do to educate and motivate the exclusively linear subscriber base,” Stankey said on a conference call with analysts. “We have tried repeatedly to make HBO Max available to all customers, using Amazon Fire devices including those customers that have purchased HBO via Amazon. Unfortunately, Amazon has taken an approach of treating HBO Max and its customers differently.”
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