After AT&T’s advertising revenues were decimated by a third in the second quarter, things are looking up. Sort of.
In third quarter earnings released this morning, AT&T’s advertising revenues ticked up 10.2% to $1.7 billion. The gains were driven almost entirely by the NBA season’s resumption and political advertising that have helped stabilize the continued challenges Covid-19 is having across the entertainment and media industry broadly and AT&T in particular.
Turner, which owns cable properties like TBS, TNT, CNN, truTV and manages Turner Sports, was a bright spot for the segment. Overall revenue at Turner was up 5.6% year over year to $3.2 billion, benefiting from the NBA basketball season’s move into the third quarter. Turner’s Q3 ad revenue jumped 18% year over year to $1.07 billion. (However, Turner’s year-to-date ad revenue was still down 17.7%, due to Covid-19’s effects in the previous quarters.)
Revenue at WarnerMedia, AT&T’s TV and film unit that includes Turner, fell 10% year-over-year to $7.5 billion. Both Warner Bros. and Home Box Office segments saw revenue declines, a somewhat expected turn due to the continued effects of Covid-19 on theatrical revenues, production and content licensing; HBO’s revenue was down slightly, 2.1%, to $1.8 billion as content revenues dipped, but subscription rates and revenues are increasing.
Overall, AT&T’s revenues were down 3.1% year-over-year to $34.3 billion.
Much film and TV production has resumed, leaving executives optimistic that the content pipeline will help bolster its suite of content-forward products and services and adjacent advertising revenue. The company had about 180 productions on the roadmap prior to Covid-19’s arrival in March, and the company has now resumed filming on about 130 of those projects , AT&T CEO John Stankey told investors Thursday morning.
“I’m breathing easier. I think everyone is breathing easier—that’s probably a bad analogy in the Covid environment,” Stankey said. “I think we’re out of the woods at this point from being dead cold in the middle of the pandemic to one where we feel like we can get hours produced and brought forward. And that’s going to help our products. Most importantly, it’s going to help HBO Max.”
The streaming service, which debuted in May, is becoming more of a bright spot for the company after a slow start. HBO Max activations, which are free for current HBO subscribers, more than doubled compared to the second-quarter levels, which had lagged after some some brand confusion and complexities around how to subscribe to the platform.
Stankey previously said that the company “had more work to do” to educate linear HBO subscribers about their eligibility to upgrade to HBO Max for no additional cost; it seems like the investment in HBO Max (which cost $600 million in the quarter and will end up costing AT&T $2 billion by year’s end, chief financial officer John Stephens said) is beginning to pay off.
Total domestic HBO and HBO Max subscribers combined, which include wholesale subscriptions, direct-to-consumer purchases and promotional subscriptions, topped 38 million in the U.S. and 57 million worldwide. (HBO Max has not yet debuted internationally, so global figures are only for HBO.) That number exceeds AT&T’s previously announced year-end target of 36 million combined subscribers for HBO and HBO Max.
Those subscription figures are especially crucial, seeing as premium video elsewhere continues to decline. AT&T’s entertainment group, which contains premium video and broadband services, were down 10.2% to $10.1 billion; premium TV subscribers, which include DirecTV, U-verse and AT&T TV lost a combined 590,000 in subscribers in the quarter. Of that, 37,000 of those losses were at AT&T TV Now, the company’s virtual MVPD service.