By Drew FitzGerald

AT&T Inc.'s second-quarter profit fell as the coronavirus pandemic and an already ailing satellite-TV business overshadowed the launch of its make-or-break streaming video service.

The telecom and media giant reported about 36 million subscribers on HBO or HBO Max, an enlarged streaming video service built around the company's premium TV brand. The Max additions included three million direct HBO Max sign-ups and about one million activated through AT&T's wireless and pay-TV services after its May 27 launch. Total activations -- the number of subscribers using the HBO Max app -- topped 4 million, suggesting many viewers had yet to upgrade their older HBO accounts.

AT&T launched the new Max service amid a worsening coronavirus pandemic that had already forced millions of U.S. viewers to hunker down at home and look for new shows to watch. The new application, designed to compete with online-only rivals like Netflix and Disney+, added hours of new original TV series, Warner Bros. films and reruns like "Friends" and "South Park" to HBO's existing library for the same price as the original service.

AT&T steered many of those cable customers to HBO Max but remained at an impasse with Amazon.com Inc. and Roku Inc., two services that resell HBO, over advertising revenue-sharing and other issues. HBO Max plans to launch an ad-supported version next year.

"We still have work to do to educate and motivate the exclusively linear subscriber base," new Chief Executive John Stankey said during a conference call with analysts, referring to customers who pay for HBO through their cable provider. "We have tried repeatedly to make HBO Max available to all customers, using Amazon Fire devices including those customers that have purchased HBO via Amazon. Unfortunately, Amazon has taken an approach of treating HBO Max and its customers differently."

AT&T's core wireless business reported a loss of 151,000 postpaid phone subscribers, a figure that included 338,000 still-active lines that the carrier took off its rolls but avoided disconnecting under the federal government's Keep Americans Connected pledge. That voluntary forbearance program ended in July after several telecom companies balked at footing the bill for more nonpaying accounts past the summer.

At the same time, the company posted a net gain of 135,000 prepaid phone customers, a sign of how many Americans' economic distress is changing how they shop for wireless plans. Prepaid accounts tend to cost less than postpaid rate plans, which bill for monthly service after it is provided.

AT&T's shrinking traditional-TV business showed why the company needs its new online service to succeed. The division holding its DirecTV satellite unit lost 886,000 U.S. premium-TV subscribers and another 68,000 online-only channel bundles. That figure included 91,000 past-due accounts kept connected under the Keep Americans Connected pledge.

The U.S. TV unit ended June with 18.4 million accounts, down from more than 25 million two years ago. Its home broadband unit, which includes all but the slowest digital subscriber lines, posted a net loss of 102,000 subscribers, which included about 159,000 past-due accounts. The unit ended the quarter with 13.9 million connections, including DSL.

The company also wrote down some of the value of its Vrio Latin American satellite-TV business, which has burdened its parent with slowing demand and unfavorable foreign currency exchange rates. The company lost 2.2 million connections after it closed DirecTV in Venezuela during the second quarter. Including that closure, the Latin American pay-TV unit ended June with about 10.7 million connections, down from 13.5 million a year earlier.

Mr. Stankey, who in July took over as chief executive from longtime boss Randall Stephenson, said $12.1 billion of cash from AT&T's operations in the quarter is helping to support investments, dividend payments and debt retirement.

Total profit fell to $1.23 billion, or 17 cents a share, compared with $3.71 billion, or 51 cents, a year earlier. Reported net income included a more than $2 billion impact from Vrio's lower valuation, higher severance payment costs and other accounting adjustments. Overall revenue fell 8.9% to $40.95 billion.

AT&T pulled its long-term financial guidance earlier this year, citing broad economic uncertainty because of an expanding pandemic. The hazy forecast came alongside thousands of job cuts, many of which the company had planned for months as part of a workforce overhaul designed to trim its expenses.

The company said Thursday that its annual dividend payout ratio -- its total dividends divided by free cash flow -- will end 2020 in the lower-60s percent range after falling to 49% in the second quarter.

The disruption caused by the virus mostly hurt WarnerMedia, which along with rivals Walt Disney Co. and Comcast Corp.'s NBCUniversal, had to idle most TV and movie production and reschedule some theater releases. The media division also missed out on months of professional sports broadcasts, sapping its ad revenue.

"I expect we're going to be dealing with some of these economic challenges in a Covid environment" through the current quarter, Mr. Stankey said. "We're operating accordingly."

Write to Drew FitzGerald at andrew.fitzgerald@wsj.com

Corrections & Amplifications HBO Max included three million direct signups and about one million activated through AT&T's wireless and pay-TV services. An earlier version of this article and correction misstated the source of the one million activated accounts as including cable providers and other wholesalers. Another version of the article incorrectly said there were three million direct sign-ups and another four million activations.