Written by
Andrew Rosen
Andrew A. Rosen is the founder of PARQOR LLC. He is a former Viacom Executive (MTVN, BET) who has been researching and writing about the streaming marketplace for C-Suite executives and investors since 2015.
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Churn and the Netflix and AT&T Q1 earnings calls
Published: April 28, 2021, 5:39 p.m.


Q1 streaming audiences numbers suggest Netflix and HBO both navigated similarly flat demand for streaming services, and the only difference between Netflix and HBO Max data in Q1 2021 was audience demand for HBO Max tentpoles.


The Netflix Q1 earnings and AT&T Q1 earnings last week told two very different stories about domestic U.S. growth:

  • Netflix domestic US & Canada growth was flat, growing 0.6% to 74.38MM from 74.84MM subscribers; and,

  • HBO Max’s Retail (Direct-to-Consumer) grew 41% to 9.7MM subscribers,

Some have been arguing that the difference in growth reflects HBO Max taking domestic subscribers away from Netflix. But I think the numbers suggest some other “food for thought” about how demand is evolving in the streaming marketplace in early 2021.

Netflix spent some of its Q1 earnings call deflecting the argument that it was losing audience to competitors by noting “our largest competitor for TV viewing time is linear TV, our second largest is YouTube”. Co-CEO Reed Hastings concluded from Netflix’s own analyses “there's no real change that we can detect in the competitive environment”. In other words, according to Netflix. Netflix did not lose subscribers to HBO Max.

In Q1 HBO Max was meeting demand for its theatrical tentpoles with day-and-date releases of Godzilla vs. Kong and other films that could not be distributed broadly in domestic U.S. theaters. So, it is important to remember the 2.7MM Retail subscribers at the end of the quarter were subscribers who indeed had signed up during the quarter, and were driven by day-and-date tentpole releases.


> HBO Max had the biggest share of new SVOD subscriptions in Q1. 2020 Q4 too, most likely due to WW1984. New entrants Paramount+ and Discovery+ taking share from everyone, except for Netflix. No big spike for Disney+ from the new MCU series. $T $VIAC $DIS $NFLX $DISCA

On this point, it is worth looking at Domestic HBO Max and HBO Subscribers after we subtract Retail subscribers. For the past three quarters this number has been steady:

  • 34,408 (Q3 2020)

  • 34,648 (Q4 2020)

  • 34,490 (Q1 2021)

This tells us HBO Max’s day-and-date drove 100% of growth via Retail, or DTC, subscriptions in Q1.

The ~158,000 drop in Domestic HBO Max and HBO Subscribers less Retail subscribers between Q4 2020 and Q1 2021 is an interesting number. It mostly reflects the drop in HBO Commercial (~166,000), which reflects “domestic accounts that do not have access to HBO Max and are billed on a bulk basis (e.g., hotels, etc.)”. That line likely reflects the impact of post-COVID hotel closures in the travel industry on HBO.

The HBO Subscribers line, or “domestic accounts that do not have access to HBO Max”, dropped by 142,000. But in past quarters those have reflected customers still under the Amazon and Roku deals that were delayed by stalled negotiations. So, when those lines have decreased after those deals were signed in Q3 and Q4 2020, we also saw proportionate increases in the Wholesale subscribers. This quarter, Wholesale subscribers went up by ~150,000, and presumably 142,000 of those came from similar accounting for the Roku and Amazon deals, or other unannounced deals.

That leaves net 8,000 subscribers WarnerMedia added organically as Wholesale subscribers to HBO in Q1. Meaning, outside Retail, the net growth of HBO inside and outside the AT&T ecosystem was a fraction of Retail’s growth, or 0.3% of the 2.7MM Retail subscribers. This was half of Netflix’s net growth of 0.61% in domestic U.S. and Canada subs.

The data suggests Netflix and HBO both navigated similarly flat demand for streaming services, and the only difference between Netflix and HBO Max data in Q1 2021 was audience demand for HBO Max tentpoles.

Therefore, there are a few things worth keeping an eye on in the weeks to come:

  1. It is reasonable to believe Reed Hastings and the data he is citing that Netflix did not lose customers to other services in the domestic U.S., at least;

  2. Netflix’s “pull forward impact” prediction appears to be indeed playing out, which I wrote about two weeks ago, and we may see flat domestic U.S, numbers for other streaming services this quarter;

  3. HBO Max’s day-and-date strategy has unearthed streaming demand that is willing to pay $14.99 per month in addition to whatever streaming services they are paying for already; and, it raises the question of whether this demand is for additional streaming services or for or is more similar to the demand for Disney’s PVOD window';

  4. The absence of an “HBO Max - Activations (Cumulative)” metric in Q1 2021 earnings- of which there had been 17.2MM in Q4 2020, split between 6.88MM Retail activations and 10.32MM Wholesale activations - implies there was an activations story among the remaining 24.17MM Wholesale accounts in Q1 20201 that was not worth sharing.

  5. The drop in HBO’s Commercial business is inevitably going to be hitting other legacy media companies with domestic U.S. hotel distribution deals for their linear networks (here’s a helpful summary of hotel closures from The Points Guy), and the open question is how they will report that drop.

We have an interesting few weeks of earnings calls shaping up ahead of us.

This is not investment advice. Any assertions made in this post represents the author’s opinion and not that of Captain Solutions.
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