AT&T had braced investors for accelerated video subscriber losses and the company delivered on its promise during the third quarter.
The company lost approximately 1.16 million premium video subscribers (DirecTV and U-verse) and lost another 195,000 AT&T TV subscribers for a total of about 1.358 million during the quarter. The losses were dramatically higher than the 297,000 total net subscribers lost in the year ago quarter.
The huge subscriber losses follow AT&T’s guidance from September warning that numbers could be high in the third quarter. CFO John Stephens said AT&T had been holding a hard line in content negotiations, which was allowing it to achieve its content cost management goals. But he advised that tactic could result in an incremental 300,000 to 350,000 premium video losses above the previous quarter’s premium video results.
Overall, AT&T’s domestic video connections are down 14.3% from 25.17 million one year ago to 21.57 million.
AT&T’s Entertainment Group revenues for the quarter totaled $11.2 billion, down 3.4% year over year. The company attributed the decline to premium TV subscriber losses that were partially offset by higher broadband revenues. The group’s operating expenses totaled $10.1 billion, down 3.6% year over year thanks to lower content and selling costs reflecting fewer subscribers and cost initiatives, but partially offset by higher costs associated with NFL Sunday Ticket. Entertainment Group EBITDA fell 1.4% to $2.4 billion but premium video ARPU was up 5.6% to $121.35.
At WarnerMedia, operating revenues totaled $7.8 billion, down 4.4%, and segment operating contribution totaled $2.5 billion, up 0.6%. The results reflected performances from Turner and HBO offsetting declines at Warner Bros. HBO’s revenues rose 10.6% year over year thanks to higher content and other revenues resulting from international licensing revenues.
At Xandr, AT&T’s advanced advertising and analytics business, revenues totaled $504 million, up 13.3% year over year. Operating expenses for the business were $177 million, up 58% due to the acquisition of AppNexus, investment in new technology and the development of AT&T’s data advertising platform.