AT&T: HBO Max has built-in features to mitigate password sharing

AT&T incorporated features into HBO Max to crack down on password sharing and actions considered as “rampant abuse” of the streaming service, according to CEO John Stankey on the company’s Q1 earnings call.

“In any given month we’ve actively looked into how particular users are using the product, and we have technical features and capabilities to limit what I would call rampant abuse,” he said. Stankey didn’t specify what those capabilities are, but he said they are in line with HBO Max’s user agreement and that AT&T was “thoughtful” about giving customers enough flexibility on the platform.

“We’ve enforced [HBO Max’s terms and conditions] in a way that I think has been customer-sensitive,” Stankey said. “You don’t see anybody complaining massively about it.”

Q1 was AT&T’s last full period in charge of WarnerMedia, consisting of HBO, CNN and other entertainment assets, before WarnerMedia closed its merger with Discovery Inc., earlier this month. AT&T ended the quarter with a total of 76.8 million HBO and HBO Max global subscribers, up 12.8 million year-over-year. Of those total users, 48.6 million are U.S. subscribers.

HBO Max maintained consistent growth, which may suggest AT&T’s built-in features to reduce password sharing have paid off. Conversely Netflix, which lost 200,000 net subscribers in Q1 with revenue only up 9.8% year-over-year, attributed password sharing as one of the primary reasons for revenue loss. Netflix in March began testing a feature requiring account owners to pay extra for users outside their household.

Despite HBO Max’s increased usage, AT&T’s year-over-year earnings declines were primarily driven by WarnerMedia, according to AT&T CFO Pascal Desroches. Adjusted earnings per share (EPS) were $0.77 compared to $0.85 year-over-year.

“The declines in earnings at WarnerMedia reflect increased investments incurred in launching CNN+ and expanding new territories at HBO Max,” Desroches said. AT&T’s divestiture of DirecTV and the termination of HBO Max’s agreement with Amazon also impacted WarnerMedia’s results.

AT&T received $40.4 billion upon completion of the transaction as well as WarnerMedia’s retention of existing debt. AT&T shareholders received 1.7 billion shares of Warner Bros. Discovery (WBD), representing 71% of the new company.

Stankey added the WBD merger helped AT&T reduce its net debt by approximately $40 billion in April.

“We feel as though we’re really well suited to navigate this unique moment in time,” he said. “This improved financial posture gives us the flexibility to carefully and prudently use the balance of the WarnerMedia proceeds to reduce our outstanding debt.”