With nothing more than a passing glance AT&T's (T 1.10%) HBO Max is doing well enough. But, investors following the story closely can't help but notice the first-quarter report didn't include the number of HBO Max "activations" completed during the quarter in question -- these had been helping gauge true interest in the nascent streaming service. All we really know for sure is an additional 2.7 million consumers are now customers of an HBO-branded service. We don't necessarily even know that they're paying for it.

By taking a deeper look at the data, however, we can draw some meaningful inferences about consumer interest in HBO Max. It's still not creating the sort of frenzy that Disney+ from Walt Disney (DIS 0.16%) did in its early days, but HBO Max is steadily drawing and keeping paying customers.

People moving into the shape of a rising arrow.

Image source: Getty Images.

A picture really is worth a thousand words

The relevant data is buried deep in the trending schedule AT&T updates in conjunction with its quarterly updates. As implied, this update details near-term trends for most of the company's key financial data and customer metrics -- including for HBO and HBO Max.

The graphic below visualizes changes to the HBO brand's customer mix over the course of the past six quarters, comparing this change to the company's average revenue per user (ARPU) collected during each quarter. Take a look.

AT&T's HBO Max retail subscriber base is growing steadily -- even if not speedily -- in a competitive, crowded market.

Data source: AT&T. Chart by author.

A few things should be explained.

First, don't be too impressed by the number of HBO Max Wholesale subscribers suddenly appearing during the second quarter of last year. These are mostly consumers subscribing to HBO through their cable television provider or eligible for access to HBO Max via another AT&T-provided service. Not all of these people were necessarily watching HBO Max. Indeed, given the relatively low number of "activations" seen for the first couple of quarters HBO Max existed -- a little over 8.6 million by the end of last year's third quarter -- most of this crowd wasn't watching HBO Max.

Second, don't sweat the sudden vanishing of all HBO customers as of the fourth quarter of last year. That's when virtually all cable-based HBO subscribers and a bunch of customers watching HBO via a streaming device were recategorized as HBO Max Wholesale or HBO Max Retail subscribers. Most of them still weren't watching HBO Max. By the end of 2020, there were still less than 17.2 million actual HBO Max activations, which was less than half the number of consumers that qualified for free access to the on-demand platform.

Third (and probably least important), HBO Commercial reflects bulk customers like hotels that offer in-room premium programming to their guests. That's why the figure doesn't change much from one quarter to the next. These are pretty reliable customers.

Fourth? This is the most compelling part of the story the graphic is telling us. That is, the HBO Max Retail subscriber count grew more than any other segment during the first quarter, and these folks are actually paying for the service.

Actually, 2.8 million more paying domestic subs is a lot

The finer print of AT&T's first quarter trending schedule explains the HBO Max Retail headcount is the number of domestic consumers that are "billed directly by WarnerMedia or by a third party via in-app purchase."

On the surface, the detail seems trivial. Think about it though. These are people that made a conscious decision to add a new expense to their regular monthly bills, and they did so outside of a cable television ecosystem. AT&T added 2.8 million of these people to its list of paying HBO Max customers who could have just as easily signed up for a competing service. The fact that last quarter's ARPU grew by a sizable $0.26 per subscriber further underscores the idea that these net additions are paying retail customers and not just subscribers enjoying complimentary access to HBO Max. Remember, while 2.8 million more retail customers are paying for HBO Max, a bunch more aren't. These paying customers meaningfully moved the ARPU needle anyway.

The industry's observers see strong consumer interest in HBO Max as well. Market research outfit Kantar says HBO Max garnered more new domestic streaming subscribers than any other service during the first quarter, even topping on-demand titans like Netflix (NFLX -9.09%) and the aforementioned Disney+.

It's a marginal victory, granted, with HBO Max accounting for 14.4% of new U.S. streaming signups versus 11.6% for Disney+ and Netflix's 8.5%. Still, as Netflix's disappointing domestic growth of only 450,000 subscribers (and similarly disappointing global net growth of only 4 million customers) shows us, the SVOD war is heating up in a big way. HBO Max is putting up a respectable fight.

Bottom line

It's too soon to hail HBO Max is the inevitable king of streaming. Netflix still holds that title with more than 200 million customers, and Disney+ is well ahead of HBO Max with over 100 million paying customers. These respective positions aren't apt to change anytime soon, whatever HBO Max's current place is.

It would be naive for other streaming services to ignore the progress HBO Max is making as of the first quarter though. While some consumers have more, Deloitte says the typical U.S. consumer is only paying for about four streaming services.