AT&T 2Q Profit Shrinks

AT&T Inc.’s second-quarter profit fell as the coronavirus pandemic and an already ailing satellite-TV business overshadowed the launch of its make-or-break streaming video service, The Wall Street Journal reports.

The telecom and media giant reported about 36 million subscribers on HBO or HBO Max, an enlarged streaming video service built around the company’s premium TV brand. The Max additions included three million direct HBO Max sign-ups and about one million activated through AT&T’s wireless and pay-TV services after its May 27 launch. Total activations—the number of subscribers using the HBO Max app—topped 4 million, suggesting many viewers had yet to upgrade their older HBO accounts.

AT&T launched the new Max service amid a worsening coronavirus pandemic that had already forced millions of U.S. viewers to hunker down at home and look for new shows to watch. The new application, designed to compete with online-only rivals like Netflix and Disney+, added hours of new original TV series, Warner Bros. films and reruns like “Friends” and “South Park” to HBO’s existing library for the same price as the original service.

AT&T steered many of those cable customers to HBO Max but remained at an impasse with Amazon.com Inc. and Roku Inc., two services that resell HBO, over advertising revenue-sharing and other issues. HBO Max plans to launch an ad-supported version next year.

AT&T’s core wireless business reported a loss of 151,000 postpaid phone subscribers. At the same time, the company posted a net gain of 135,000 prepaid phone customers, a sign of how many Americans’ economic distress is changing how they shop for wireless plans. Prepaid accounts tend to cost less than postpaid rate plans, which bill for monthly service after it is provided.

AT&T’s shrinking traditional-TV business showed why the company needs its new online service to succeed. The division holding its DirecTV satellite unit lost 886,000 U.S. premium-TV subscribers and another 68,000 online-only channel bundles.

The U.S. TV unit ended June with 18.4 million accounts, down from more than 25 million two years ago. Its home broadband unit, which includes all but the slowest digital subscriber lines, posted a net loss of 102,000 subscribers, which included about 159,000 past-due accounts. The unit ended the quarter with 13.9 million connections, including DSL.

AT&T’s WarnerMedia division took the brunt of the hit from the pandemic, with $1.5 billion in lost revenue directly attributable to the coronavirus.

Q2 WarnerMedia revenue declined 23% YoY to $6.8 billion. The cancellation of sports hit advertising revenues hard. Postponement of the NBA season caused Turner’s revenues to decline 12% YoY to $3 billion.

WarnerMedia advertising revenues took a $620 million hit from COVID-19, and video advertising (a category that includes Xandr) took a $170 million hit due to the pandemic.

Total profit fell to $1.23 billion, or 17 cents a share, compared with $3.71 billion, or 51 cents, a year earlier. Reported net income included a more than $2 billion impact from Vrio’s lower valuation, higher severance payment costs and other accounting adjustments. Overall revenue fell 8.9% to $40.95 billion.