HBO Max Adds Nearly 3 Million Subscribers as Streamer Finds Its Footing

AT&T is raising its expectations for year-old streamer HBO Max. The company, which is planning to spin out the WarnerMedia portion of its business to Discovery in a merger slated to close next year, told investors this morning that it expected its burgeoning direct-to-consumer streaming business to have between 70 million and 73 million global HBO Max and HBO subscribers by the end of the year, up from its previous forecast of 67 million to 70 million. The adjusted forecast comes at a point of steady momentum for WarnerMedia-owned HBO Max, which debuted in May 2020 and is charting a steady expansion with an ad-supported tier and a global rollout that started in late June. At the end of the quarter, HBO Max and HBO had a combined 47 million subscribers domestically, an addition of 2.8 million total domestic subscribers from the previous quarter. Year-over-year, HBO Max and HBO have added 10.7 million subscribers. Internationally, the streaming service counts 67.5 million global subscribers, an increase of 12 million in a year’s time. “HBO Max continues to exceed our expectations, having surpassed the lower end of our global subscriber target six months ahead of plan,” AT&T chief financial officer Pascal Desroches told investors. Most of the growth comes from HBO Max retail subscribers, which is what the company calls users who sign up directly for the streamer instead of activating an HBO Max account they are already entitled to get for free as an HBO cable subscriber or through a wholesale agreement. Nearly 2.4 million of the 2.8 million domestic subscribers to HBO Max in the quarter were retail net adds, the company said—marking a growth reversal from HBO Max’s earlier months on the market, when the bulk of the company’s subscriber growth was coming from account activations and wholesale agreements. Wholesale subscribers are still essential to the company’s subscriber base, though: In all, HBO Max counts 12 million retail subscribers and nearly 31.5 million wholesale subscribers; HBO has nearly 20.5 million commercial subscribers, according to company filings. Those new customers are helping to grow the company’s direct-to-consumer subscription revenues. That figure, which stems from paying HBO Max and HBO customers, are up 38.5% in the quarter. Subscription revenue overall, which also includes traditional pay-TV HBO subscribers, reached $4 billion in the quarter, an increase of 21.3%. WarnerMedia ad revenue jumps 48.5% In the WarnerMedia segment, advertising revenue has rebounded considerably from a year ago when advertising collapsed due to the pandemic. Ad revenues reached $1.7 billion in the quarter, up 48.5% compared to a year ago, which the company said was due to strength in its news properties like CNN and the return of the NBA on Turner Sports, with sports-related ad revenue alone bringing in $400 million, Desroches said. In all, revenues in the segment were $8.8 billion, up more than 30% year-over-year. Upfront sales, which wrapped at the end of June, have been “really strong,” Desroches said, although the company declined to share specifics with investors. (Adweek previously reported that the upfront was its most successful in WarnerMedia history.) Despite the rosy outlook for HBO Max, the company is postponing part of its global rollout. HBO Max is planning to push back some of its launches in European markets until early 2022 so it can focus on its continued Latin American expansion, Desroches said. 'No news is good news' on WarnerMedia/Discovery merger Looming over the call were questions about how AT&T will execute the planned spinout of WarnerMedia to join forces with Discovery Inc. in a company that will be known as Warner Bros. Discovery. The merger, which is designed to set the combined company up for streaming success, with Discovery CEO David Zaslav helming the newly formed entity, remains on track, and the company is going through “all the normal steps” to closing the deal, AT&T CEO John Stankey told investors Thursday. But he otherwise declined to share additional details, saying that “no news is good news” on the plans. Also unclear is the fate of WarnerMedia CEO Jason Kilar and how long he will remain at the company. Kilar, who is reportedly negotiating his exit, was on the call with investors Thursday morning but spoke only briefly at the end about the continued success of Warner Bros.' day-and-date film releases through 2021 that has paid dividends for the company’s subscriber growth. Kilar assured investors and industry listeners that traditional theatrical releases are still crucial to the company, but he also said that the industry would chance to favor more in-home viewing. In other words: Expect shorter windows for a portion of Warner Bros.’ film slate and more direct-to-streaming videos in the future from the company. “I certainly don’t anticipate us going back to the way the world was in 2015 or 2016 or 2017,” Kilar said. What WarnerMedia-Discovery’s Streaming-Centric Merger Means For HBO Max and Discovery+