AT&T says HBO Max is firing on all cylinders — amid fierce competition in the streaming wars — and the telco raised its expectations for HBO/HBO Max subscriber growth by the end of 2021.

For the second quarter of 2021, the company reported a net gain of 2.85 million total domestic HBO Max and HBO subscribers (including 2.38 million retail net adds), for a total of 47.0 million at the end of the period. That’s a gain of 10.7 million over past year in the U.S. Globally, HBO and HBO Max had 67.5 million customers at the end of Q2, up 12 million in past year.

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HBO Max direct-to-consumer subscription revenue increased 39% year-over-year, to $2.0 billion for Q2. (Note that HBO Max launched in late May 2020, superseding the previous HBO Now service.) Domestic HBO Max and HBO average revenue per subscriber in the quarter was $11.90, up from $11.72 per month in the prior quarter.

Given HBO Max’s momentum, AT&T said it now expects 70 million-73 million global HBO Max/HBO subscribers by the end of year. Previously, the company forecast 67 million-70 million subscribers worldwide by the end of 2021.

“HBO Max had another strong quarter and is ahead of plan to be a leading direct-to-consumer streaming platform, with both subscriber- and ad-supported choices,” AT&T CEO John Stankey said in announcing the Q2 results.

AT&T is in the midst of spinning off WarnerMedia, in a proposed combo with Discovery expected to be completed by mid-2022.

The growth of HBO Max has been boosted by WarnerMedia’s controversial strategy of releasing Warner Bros.’ entire 2021 movie slate day-and-date in theaters and on the premium SVOD service. In 2022, WarnerMedia has said it will scale that back to release tentpole pictures in traditional theatrical windows — which could flatten HBO Max’s upward trajectory.

On June 2, WarnerMedia debuted HBO Max with ads, priced at $9.99/month (versus the $14.99/month price for the ad-free version), which excludes day-and-date access to Warner Bros. movies. In announcing the Q2 results, AT&T didn’t provide any info on uptake of the ad-supported plan. On June 29, it launched HBO Max in 39 territories in Latin America and the Caribbean.

Overall, AT&T beat Wall Street estimates on revenue and earnings. The company reported Q2 revenue of $44.0 billion, up 7.6% from $41.0 billion in the year-ago quarter, and net income of $1.5 billion, or 21 cents per diluted common share. Adjusted EPS was 89 cents per share, up from 83 cents a year earlier.

WarnerMedia revenue for Q2 was $8.8 billion, up 30.7% versus the year-ago quarter, reflecting “the partial recovery from prior-year impacts of the pandemic” as well as higher content, subscription and advertising revenue. The unit’s ad sales in the quarter totaled $1.7 billion, up 48.5% when compared to the prior year, attributed to the return of the NBA and “strength in news” (a reference to CNN). On the WB front, AT&T said it expects “continued theatrical revenue improvement in second half of 2021.”

However, WarnerMedia’s operating income was down 11.3%, to $1.7 billion, due to “continued HBO Max investment and higher sports costs,” AT&T said. Operating income margin was 19.2%, compared with 28.4% in the year-ago quarter.

In addition to the WarnerMedia spin, AT&T also is close to completing the spin-off of its declining DirecTV unit. On Thursday, the telco announced the sale of its Vrio satellite TV business in Latin America to Grupo Werthein, a deal AT&T said carries an enterprise value of $500 million. With the Vrio sale, AT&T took a $4.6 billion impairment charge, including $2.1 billion related to accumulated adjustments for foreign-currency exchange rates.

AT&T said it expects the DirecTV spin-off, under which TPG Capital will own 30% and the telco will retain 70% ownership, to close “in the next few weeks.” The company expects to net about $7.8 billion when the deal closes and “annual cash distributions” of more than $1 billion. For the second half of 2021, the DirecTV spin-off will result in revenue to be lower by about $9 billion, EBITDA to be lower by $1 billion and free cash flow to be lower by about $1 billion. The telco said it does not expect any change to adjusted EPS or capital investment guidance.

Last week, AT&T disclosed that DirecTV and its other pay-TV businesses lost 473,000 subscribers in Q2, for a total of 15.412 million at the end of the period. That’s a decline of 2.3 million year-over-year, or 13%, from 17.712 million in Q2 2020.





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