AT&T Streaming Investments Take $1.2B Chunk Of Revenue

Cord-cutting and the streaming wars are affecting AT&T’s bottom line and subscription base, triggering a disappointing fourth quarter, according to reports on Wednesday (Jan. 29).

AT&T reported that it lost 219,000 subscribers on its TV Now streaming service in the fourth quarter and 945,00 premium subscribers at DirecTV and U-Verse. WarnerMedia earnings in the quarter were also down due to revenue tied to HBO Max. AT&T also lost $1.2 billion because of sinking money into a streaming service to compete with Netflix.

On an earnings call Wednesday (Jan. 29), AT&T Chief Financial Officer John Stephens said earnings would remain off as the firm gets closer to the May rollout of HBO Max.

During the first six months of 2020, “we expect pressure from heavy HBO Max investment, which you saw begin in the fourth quarter,” Stephens said.

John Stankey, chief executive officer of WarnerMedia and chief operating officer of AT&T, said WarnerMedia made a “strategic decision” to keep certain shows for HBO Max rather than license them to run elsewhere. He said the HBO Max investment would “pay off over the long term.”

Losses at WarnerMedia played a role in AT&T’s drop in general revenues, which fell to $46.8 billion in the fourth quarter, 2.4 percent less than a year ago and missing analyst expectations of $46.9 billion.

AT&T’s regular television business is also suffering as people cut cable cords and rely on streaming subscription services. The company lost 945,000 premium video customers in the fourth quarter. In 2019, it lost over 4 million customers.

On the upside, the Texas-based firm saw a fourth-quarter jump in prepaid subscribers for its wireless phone business, adding 229,000 new customers, beating analyst forecasts of the 83,000 new users. Prepaid subscribers pay their monthly bills in advance.

In July, AT&T partnered with Microsoft to let the communications giant use Microsoft’s Azure cloud system for its computing purposes. Microsoft will become AT&T’s “preferred” cloud company. Amazon is currently the largest cloud provider.

The two companies said they will collaborate on edge computing, which means that Microsoft technology will be incorporated in AT&T’s forthcoming 5G network.