AT&T Q4: HBO Max Activations Double to 17.2 Million, Warner Bros. Revenue Declines 21%

AT&T said “Wonder Woman 1984” helped HBO Max double activations — to 17.2 million — in the fourth quarter of 2020. But a 21% decline in Warner Bros. revenue for Q4, as well as other COVID-related impacts, pulled the down company’s revenue down and earnings for the quarter.

At the end of 2020, WarnerMedia had 41.5 million HBO Max and HBO domestic subscribers, up 20% from 34.6 million a year prior. AT&T said it hit the number a full two-years faster than its initial forecast.

But AT&T took a $780 million charge related to from the impairment of production and other content inventory at WarnerMedia, with $520 million resulting from the continued shutdown of theaters during the pandemic and “the hybrid distribution model for our 2021 film slate.” WarnerMedia plans to release all movies on the Warner Bros. slate day-and-date on HBO Max and in theaters.

Warner Bros. revenues for the fourth quarter of 2020 were $3.2 billion, down 21.2 percent versus the year-ago quarter, driven by the postponement of theatrical and home entertainment releases and unfavorable comparisons to prior year releases. Theatrical releases in 2019 included the early fourth quarter release of Joker, compared to the limited-capacity and hybrid HBO Max distribution release of Wonder Woman 1984 near the end of the fourth quarter of 2020. Revenue declines also reflect lower television licenses and production revenues that were impacted by pandemic-related production delays, which impacted the delivery of the 2020-21 broadcast season, and lower licensing. Warner Bros. operating expenses totaled $2.5 billion, down 25.9 percent versus the fourth quarter of 2019, primarily due to fewer theatrical and home entertainment releases, which resulted in a decline in production and marketing costs. Warner Bros. operating income margin was 24.4 percent compared to 19.5 percent in the year-earlier quarter.

HBO revenue for Q4 was $1.9 billion, up 11.7%, driven by growth in subscription revenues primarily due to higher HBO Max direct-to-consumer subscribers in the U.S. and the May 2020 acquisition of the remaining interest in HBO Latin America Group.

At December 31, 2020, AT&T’s Video division had approximately 17.2 million video connections compared to 20.4 million at December 31, 2019. During the fourth quarter of 2020, premium TV video subscribers, which includes AT&T TV, had a net loss of 617,000. Subscribers to AT&T TV NOW, our OTT video service, had a net loss of 27,000. Beginning in January 2021, AT&T TV NOW has been combined with AT&T TV.

AT&T’s consolidated revenues for the fourth quarter totaled $45.7 billion versus $46.8 billion in
the year-ago quarter. The COVID-19 pandemic impacted revenues across most businesses,
particularly WarnerMedia and domestic wireless service revenues, which were pressured from
lower international roaming. For the quarter, revenue declines included domestic video,
Warner Bros. television and theatrical products, legacy wireline services, and Latin America,
which includes foreign exchange pressure. These declines were partly offset by higher domestic
wireless revenues, primarily from equipment sales.

Operating income/(loss) was ($10.7) billion versus $5.3 billion in the year-ago quarter due to
the non-cash asset impairments in the quarter and the impact of lower revenues. Operating
income margin was (23.5%) versus 11.4% in the year-ago quarter. When adjusted for non-cash
asset impairments, merger-amortization costs and other items, operating income was $7.8
billion versus $9.2 billion in the year-ago quarter, and operating income margin was 17.1%
versus 19.6% in the year-ago quarter.

Disruptions caused by the coronavirus (COVID-19) and measures taken to prevent its spread or mitigate its effects both domestically and internationally have impacted our results of operations. Fourth-quarter 2020 earnings include approximately $650 million, or $0.08 per diluted share of COVID-19 impacts, including $90 million, or $0.01 per diluted share, of cost reductions reflecting insurance recoveries associated with WarnerMedia business disruption recoveries offset by additional incremental expense.

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