HBO Max Takes Modest Subscriber Hit Following Amazon Channel Expiration

A month ago, WarnerMedia’s distribution deal to make HBO programming available through a paid Amazon Prime Video Channel ran out, meaning that millions of wholesale customers paying to watch HBO via an add-on channel lost access. Despite looking to woo those customers back with a steeply discounted subscription to HBO Max, the media company is experiencing a slight subscriber setback. In AT&T’s third quarter earnings today, the company’s WarnerMedia segment saw domestic subscribers to HBO Max fall by around 1.8 million, from 47 million to 45.2 million. Most of those losses were on the wholesale side, of which deals with distributors like Amazon Prime Video Channels are a part. Those total wholesale subscriptions dropped to 29 million in the quarter, down nearly 8% from the previous quarter. But international expansions and a slight uptick in retail customers—meaning customers who pay full price for HBO Max—helped offset some of those short-term losses. Internationally, HBO and HBO Max subscribers climbed 1.9 million to a total 24.2 million combined subscribers, an 18% increase compared to last quarter. On the retail side, direct customers climbed slightly, from 12 million in the second quarter to 12.6 million in the third quarter. On a call with investors Thursday morning, WarnerMedia and AT&T executives defended the move to turn away from Amazon as a necessary short-term setback. What WarnerMedia-Discovery’s Streaming-Centric Merger Means For HBO Max and Discovery+ “I think it’s safe to say that we’re very happy with the quarter when you think about how we’ve grown 1.9 million [subscribers] worldwide,” WarnerMedia CEO Jason Kilar told investors. “Even if you think about the Amazon exit, which we think is a very strategic decision that three companies really have made so far, which includes Disney and Netflix being the other two, we feel very good about the quarter.” Approaching 70 million subscribers That meant HBO Max ended the quarter on a high note despite the short-term subscriber shrinkage. The company reported a combined 69.4 million global subscribers at the end of the quarter, up 3% from the previous quarter and fast approaching the projected 70 million to 73 million it had previously told investors to expect. Heading into the fourth quarter, a stronger content slate on HBO Max, including the return of series like Succession and Curb Your Enthusiasm, along with day-and-date film releases of titles like Dune, King Richard and The Matrix Resurrections, would help lift subscriber figures back up, said AT&T senior vice president and chief financial officer Pascal Desroches. “Given our upcoming content slate and expanding global footprint, we expect to end the year at the higher end of our year-end global subscriber target,” Desroches said. Overall, WarnerMedia reported $8.4 billion in revenue in the quarter, up 14% from the previous year. The company reported $1.4 billion in advertising revenues, down about 12% due to the timing around sports broadcasts. At top of mind for investors is the anticipated merger of WarnerMedia and Discovery, which is expected to close in the middle of 2022. That deal, which is expected to radically reshape the media landscape, is not changing the company’s approach to building out HBO Max, which has included an expansion into an ad-supported tier and a focus on further international expansion, along with regular product updates. “We’re in a window here in [the direct-to-consumer business] footrace and it’s an important footrace. So there’s no pulling the foot off that accelerator in that regard,” AT&T CEO John Stankey told investors. “Everything that we do right now to make the product better and add customers is a step in the right direction and the consistent direction of where the closed and combined business goes.”