AT&T continues to shed TV subs with HBO Max launch on horizon

AT&T lost a little under 900,000 TV subscribers in Q1 2020 in a continued downward spiral for the operator. 

Announcing its quarterly results on April 22, the operator confirmed that it had lost 897,000 premium TV subscribers in the quarter. This is made up of DirecTV, U-Verse, and AT&T TV customers.

Cord-cutting OTT service AT&T TV Now (formerly DirecTV Now) lost 138,000 subscribers in the quarter. This is an improvement from Q4 2019, where the service lost 219,000 subscribers. The loss was attributed to higher prices and less promotional activity.

However it was the WarnerMedia segment that bore the brunt of losses, with revenue down from US$8.4 billion to US$7.4 billion year-over-year.

The company said that this was largely to do with a loss of ad revenue due to the cancellation of the NCAA Men’s Division I Basketball Tournament (better known as March Madness) and comparisons to a strong Q1 2019 at the box office.

The operator saw an 11.8% overall increase in net income to US$4.578 billion, but revenue dropped by 4.6% to US$42.779 billion. The coronavirus – including the aforementioned cancellation of March Madness – is estimated to have cost AT&T US$605 million in revenue to date. AT&T missed Wall Street expectations of US$44.2 billion.

In spite of the worse than expected figures and volatile environment created by the global pandemic, AT&T president John Stankey maintained a positive attitude. Speaking on the company’s investors’ call, he said: “As you might expect, we’re not backing off our cost and efficiency transformation initiatives that remain largely under our control. If anything, we see this as an opportunity to approach all our businesses differently and better align our work with how COVID has reshaped customer behaviors and the economy.”

However, the company has made the move to pull  its 2020 financial forecast, with coronavirus uncertainty “limiting visibility for now.”

CFO John Stephens said: “With the uncertainty caused by COVID and the recovery, we have withdrawn all prior financial guidance. No one knows the full duration and magnitude of this situation. We have been running several different stress test scenarios with varying degrees of severity.

“Through it all, we expect to come through this healthy and expect that our cash flow will allow us to continue to invest in growth areas, to provide ample dividend coverage, and allow us to retire debt.”

Of upcoming streamer HBO Max, Stankey said: “HBO Max continues to be a high priority and we are set to launch May 27. We were right about the streaming model on HBO Max. Streaming that appeals to all demographics is in high demand. We have announced distribution agreements that cover nearly 50% of the HBO embedded wholesale base and over two-thirds of the retail base with more still to come prior to launch.”

Stankey said that the platform is being finalised from a technical perspective and promised that it will “offer one of the best customer experiences in streaming.”

Stephens added: “This crisis has shown the value of premium streaming entertainment and we anticipate strong demand for HBO Max when it launches next month.”

The company had previously confirmed that upcoming movie Scoob! has been pulled from cinemas amid the pandemic and that it will premiere on TVOD services followed by “an exclusive streaming premiere on HBO Max.”

Stankey said that this is a part of the operator’s “rethinking of our theatrical model” and that it is “looking for ways to accelerate efforts that are consistent with the rapid changes in consumer behavior from the pandemic.”