HBO owner AT&T squeezed by losses in entertainment unit WarnerMedia

AT&T’s third quarter earnings were dragged down by the entertainment assets its recently acquired from Time Warner even as its new streaming service, HBO Max, continued to gain subscribers.

The telecom giant behind Warner Bros. film studios and HBO said its profit for the three months ended in September fell to $2.8 billion, or 39 cents a share, compared with about $3.7 billion, or 50 cents, a year earlier. The result included about 21 cents of per-share costs tied to the pandemic.

Revenue fell 5 percent to $42.3 billion, the company said adding that the coronavirus crisis was responsible for $2.5 billion in lost revenue during the quarter.

Among the hardest hit at a time when the pandemic continues to stifle box office receipts and advertising sales was AT&T’s entertainment division WarnerMedia, which oversee HBO, CNN and Hollywood studio Warner Bros.

Adjusted income in that unit dropped 36.1 percent, falling nearly $900 million to $1.93 billion. Wilting box office sales dragged Warner Bros.’ revenues down 28 percent, pulling WarnerMedia’s overall revenue 10 percent to $7.51 billion.

AT&T Chief executive John Stankey told investors that he isn’t optimistic on a recovery for the movie theater industry any time soon due to the uncertainty of the pandemic.

“We’re expecting this to be incredibly choppy moving in to next year…We are not optimistic.. not expecting a huge recovery in theatrical moving into the early part of next year,” he said.

AT&T’s efforts to build out HBO Max, its answer to Netflix launched in May, cost the company $600 million last quarter, bringing its current investment in the service to $1.3 billion.

In good news, the company added 8.6 million subscribers, more than double the 4.1 million reported number it added in the previous quarter.

When combining HBO and HBO Max, AT&T reported 38 million subscribers domestically, “well ahead” of internal projections, Stankey said.

In an effort to keep costs down, AT&T has been cutting staff at WarnerMedia as it restructures the unit to focus on more streaming.

AT&T, which is on the process of selling its Direct TV satellite TV business, closed on an $85 billion deal to buy Time Warner’s media assets in June 2018. But the pandemic has put its media building plans on hold with Warner Bros. joining other Hollywood studios in rescheduling major flicks until 2021 and beyond.

The studio has moved “The Batman,” starring Robert Pattinson from Oct. 1, 2021 to March 4, 2022, as well “Dune,” starring Timothée Chalamet, from Dec. 18 to Oct. 21, 2021.

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