With ‘Godzilla vs. Kong’ and ‘Tom & Jerry,’ HBO Max adds 2.7 million subscribers in first quarter

Streaming service HBO Max gained 2.7 million subscribers in the first quarter, boosted by Warner Bros.’ movies “Godzilla vs. Kong,” “Tom & Jerry,” and Zack Snyder’s cut of “Justice League.”

Parent company AT&T released corporate earnings Thursday, which provided an early test of WarnerMedia Chief Executive Jason Kilar’s pandemic strategy to steer the company’s new movies to HBO Max the same day they arrive in theaters —a move that roiled Hollywood directors and top talent who created their films for the big-screen experience.

AT&T is betting big on the streaming service to justify its $85-billion acquisition of the WarnerMedia assets three years ago — a purchase that left the company swimming in debt. On Thursday, the Dallas telecommunications giant said HBO Max has notched 11 million domestic subscribers since it launched May 27.

The premium service, along with the legacy HBO networks, now have a total of 44.2 million domestic subscribers, compared to 41.5 million at the end of December. The company said HBO Max by itself now has about 40.6 million subscribers.

The numbers benefited from HBO Max’s inclusion late last year on Roku and Amazon Fire devices.

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“I’ve been incredibly encouraged by the results,” Kilar said in an interview. “I feel very good about what consumers are doing both at the box office and in terms of HBO Max.”

Warner Bros.’ December announcement that it would release its entire 2021 slate of films on HBO Max the same day the movies arrived in theaters angered some filmmakers. Still, the studio’s movies have done exceptionally well in theaters, providing a salve for ailing cinema operators who have been desperate for new product to welcome back moviegoers following an extended coronavirus lockdown.

For example, “Godzilla vs. Kong,” has captured $391 million worldwide since its March 31 release. And Warner Bros.’ February release “Tom & Jerry” has surpassed $100 million in global ticket sales.

The company hoped the new films would also propel interest in HBO Max after the streaming service’s sluggish start. The company has previously disclosed that “Godzilla vs. Kong” attracted the largest audience of any movie or TV show on the service since its launch.

At a higher price point — $14.99 a month — HBO Max suffered against comparisons to the lower cost Disney+, which has exceeded expectations by reaching 100 million subscribers worldwide, and the continued expansion of Netflix, which now has more than 200 million customers around the world.

On Tuesday, Netflix missed its expectations on the number of customers it would add in the quarter with nearly 4 million, down 75% from a year earlier when consumers flocked to Netflix.

“If you were to compare us to folks who have been at this for a while, like Netflix, the numbers are pretty darn impressive on an apples-to-apples basis,” Kilar said.

Kilar acknowledged that new films, including “Judas and the Black Messiah,” played a part in growing the HBO Max subscriber numbers — but he also credited HBO originals, including a documentary about golf legend Tiger Woods, for the growth. The company said it continues to be pleased with its customer engagement and retention, although AT&T didn’t disclose those important metrics.

“It’s a number of things, and of course, it starts with the content,” Kilar said of the growth. “It’s also a function of a lot of things that typically don’t get the ink — how the technology is working, how the product has been designed .... All of these things get better each and every week.”

AT&T stopped reporting HBO Max “activations,” a statistic the company provided Wall Street last year to demonstrate its ability to get traditional HBO subscribers to convert their subscriptions to the new service. Without that, it is impossible to say how many legacy subscribers have embraced the new service.

Kilar said reporting activation numbers didn’t make sense now that the company is more focused on recruiting new subscribers and rolling out the service internationally. HBO Max will launch in 39 countries this quarter, and be available in 61 countries by year’s end. The company also is preparing an advertiser-supported version of HBO Max, which will be unveiled in June.

“Going from where we are today to where we think we will be — 120 million to 150 million paying subscribers by the end of 2025 — you get there not just through wholesale but through retail,” in other words, selling directly to consumers, Kilar said.

The architect of the widely successful Hulu service joined WarnerMedia as its chief executive one year ago, charged with leading a company that had thrived in traditional media into a more competitive digital space.

WarnerMedia revenue in the first quarter rose 9.8% to $8.53 billion, boosted by college basketball on its Turner cable TV channels. Subscription revenues accounted for $3.8 billion, a gain of 12.6%, including contributions from HBO Max.

Domestic HBO and HBO Max revenue per subscriber for the quarter was $11.72 per month, a 2% decline from the first quarter of 2020. Still, HBO Max’s per-subscriber revenue is higher than its competitors.

“We’ll need to keep our eyes on how much HBO subscription revenue is simply a function of being bundled into AT&T’s respective wireless and broadband offerings,” media analyst Craig Moffett wrote in a Thursday morning research note. “Taken as a whole, revenues in the WarnerMedia segment grew by a healthy 9.8%.”

Overall, AT&T revenue climbed 2.7% to $43.9 billion for the January-March quarter. Net income was $7.55 billion, or $1.04 a share, up from $4.61 billion, or 63 cents a share, a year earlier. AT&T’s shares gained 4% in morning trading to around $31.40 a share.