AT&T Q4: WarnerMedia Takes $1.2 Billion Hit on HBO Max Investment, Telco Loses 1.2 Million TV Subscribers

AT&T’s top line was stung by its investment in HBO Max in the fourth quarter of 2019 to the tune of $1.2 billion in “foregone licensing revenues.” The telco also continued to see rapid deterioration in its pay-TV business, losing a total of nearly 1.2 million subscribers in Q4.

WarnerMedia — comprising Turner, HBO and Warner Bros. — saw Q4 revenue drop 3.3% to $8.9 billion, while operating income fell 9.5% to $2.4 billion. That decline included an estimated $1.2 billion in foregone licensing revenue during the quarter for content earmarked to stream exclusively on HBO Max, set to launch in May 2020. Shows coming to HBO Max include the full run of “Friends,” which left Netflix at the end of 2019.

In Q4, AT&T’s DirecTV and other premium TV video subscribers had a net loss of 945,000 customers, while the AT&T TV Now service (formerly DirecTV Now) dropped a net 219,000 customers. As of the end of 2019, AT&T reported 20.4 million video connections (including 926,000 AT&T TV Now subscribers) — down 17% from 24.5 million at Dec. 31, 2018.

Overall, AT&T posted revenue of $46.82 billion (down 2.4%) and adjusted earnings per share of 89 cents (up 3.5%). That missed Wall Street consensus expectations of $46.96 billion in revenue and beat EPS forecasts of 88 cents.

“We delivered what we promised in 2019 and we begin this year with strong momentum in wireless, with HBO Max set to launch in May and our share retirement plan well underway,” said Randall Stephenson, AT&T chairman and CEO, in announcing the results.

Within WarnerMedia, Turner had $3.26 billion in Q4 revenue (up 1.6%) on higher subscription revenue while ad sales dropped 2%. HBO grew revenue 1.9% to $1.7 billion, attributed to higher digital subscribers; the premium programmer’s operating income dropped 27.5% in the period on higher programming, distribution and marketing costs.

Warner Bros. revenue dropped 8% year-over-year to $4.12 billion, as the HBO Max investment depressed TV licensing revenue and the studio had lower theatrical revenue compared with a “more favorable mix of box office releases” in Q4 2018.

Revenue in AT&T’s Entertainment Group, which includes its pay-TV business, fell 6.1% to $11.2 billion, driven by cord-cutting and declines in legacy telecom services partially offset by higher broadband revenue. The Entertainment group’s operating expenses of $10.5 billion were down 5.8% largely because of lower content costs from fewer subscribers offset by higher costs associated with DirecTV’s NFL Sunday Ticket.

AT&T’s Mobility wireless group held steady in Q4. Revenue edged up 0.8% to $18.7 billion, as the company reported a net gain of 3.6 million wireless subscribers to stand at 165.9 million connections at year-end (including more than 1 million connections to AT&T’s FirstNet network for first responders).

In announcing the year-end 2019 earnings, AT&T boasted that it reduced net debt by $20.3 billion during the year, hitting its target of maintaining a net-debt-to-adjusted-earnings ratio of 2.5. The company reported $151.7 billion in long-term debt as of Dec. 31, 2019, much of it amassed as part of acquiring Time Warner.

AT&T reiterated 2020 financial guidance. It’s forecasting revenue to increase 1%-2%, with adjusted EPS of $3.60 to $3.70 including the HBO Max investment (vs. $3.57 for full-year 2019). As execs have previously said, the company expects to sell $5 billion-$10 billion in additional assets this year — and has forsworn any major acquisitions in the next three years under an agreement with investor Elliott Management.

More Digital

  • Netflix in Nigeria

    Netflix's Head of African Originals Lays Out Streamer's Plans for the Continent (EXCLUSIVE)

    Netflix chief content officer Ted Sarandos and a team of high-level executives have spent the week crisscrossing the African continent, wooing local creators and touting plans to thrust the continent center-stage as the streaming giant’s first African original series, “Queen Sono,” drops worldwide on Friday. Sarandos took the mic at a splashy event in Lagos [...]

  • Editorial use only. No book cover

    Everything Coming to Netflix in March

    Netflix is adding a robust line-up of popular programs to its slate in March. In addition to rom-coms like Matthew Mcconaughey’s “Ghosts of Girlfriend’s Past,” “He’s Just Not That Into You” and “Always a Bridesmaid,” the streamer is also adding a few classics like “Goodfellas” and “The Shawshank Redemption” starring Morgan Freeman and Tim Robbins. [...]

  • Illustration of the video streaming company

    Coronavirus Spread Benefits Netflix, Other 'Stay-at-Home' Companies, Analysts Say

    Amid fears over a global economic slowdown from the widening coronavirus outbreak, companies like Netflix that provide in-home services are best positioned to withstand the storm or even see upside from the crisis, according to industry analysts. Netflix “is an obvious beneficiary if consumers stay home due to coronavirus (COVID-19 virus) concerns, and this has [...]

  • YouTube TV

    YouTube TV Is Dropping Fox Regional Sports Nets, YES Network After Sinclair Standoff

    YouTube TV, Google’s internet pay-TV service, said it will drop the Fox regional sports networks and the YES Network from customer lineups this Saturday, Feb. 29 — citing an impasse in negotiations with Sinclair Broadcast Group, which owns the RSNs. “We purchase rights from Sinclair to distribute content to you,” the YouTube TV account said [...]

  • Facebook F8 Conference 2019 - Mark

    Facebook Cancels F8 Developers Conference Over Coronavirus Fears

    The worldwide coronavirus pandemic has prompted Facebook to cancel this year’s F8 developers conference. The F8 2020 was scheduled for May 5-6 at the McEnery Convention Center in San Jose, Calif. The social giant had held the conference every year since 2007, and last year’s F8 drew more than 5,000 attendees, according to the company. [...]

  • Rachel Whitney Joins Spotify as Nashville

    Rachel Whitney Joins Spotify as Nashville Head of Editorial

    Rachel Whitney, formerly of YouTube, is joining Spotify as the Head of Editorial for Nashville, she announced in a social media post (which recently has become a method of the streaming giant announcing new employees).  A source close to the situation points out that the company now has two female executives at the helm of [...]

More From Our Brands

Access exclusive content