Trump’s Attorney General Nominee to Recuse Himself from AT&T/Time Warner Appeal

William Barr, President Trump’s pick to replace Jeff Sessions as U.S. Attorney General, reportedly is set to recuse himself from the Department of Justice’s ongoing appeal of AT&T/Time Warner merger.

Barr, who is set to appear before the Senate Judiciary Committee for confirmation hearings, has about $1.2 million in AT&T stock, according to financial disclosures reported by Reuters.

Barr also served on the Time Warner board from 2009 to 2018 when it was acquired by AT&T for $85 billion.

As Attorney General, Barr would oversee the government’s antitrust appeal, which claims the merger that created WarnerMedia is bad for consumers and that the federal judge in the original case erred in applying the law.

Reuters reports Barr informed Senator Amy Klobuchar (D-MN) of his decision.

“He told me he was going to recuse himself from the Time Warner-AT&T appeal because he was involved in that, the Time Warner side,” Klobuchar said.

 

AT&T CFO: Corporate Tax Cut a Boon to Corporate Debt

To fiscal hawks, AT&T’s $85 billion acquisition of Time Warner heightened concerns regarding the telecom’s burgeoning corporate debt.

In an era of shrinking pay-TV households and industry consolidation, Wall Street hasn’t taken lightly to AT&T’s $183 billion debt through the third quarter (ended Sept. 30, 2018) following the acquisition.

The company’s stock was down more than 20% at the end of 2018 with a debt ratio of 2.8. The net debt to pre-tax earnings ratio indicates how many years it would take for a company to pay back its debt if net debt and pre-tax earnings are held constant.

Wall Street looks for a company to have a debt ratio between 0.3 and 0.6, according to some analysts. AT&T has pledged to reduce its debt by $20 billion in 2019, at debt ratio to 2.5.

Speaking Jan. 9 at the Citi 2019 Global TMT West confab in Las Vegas, AT&T CFO John Stephens reiterated management’s vow to streamline debt through cost-cutting and asset sales — including its stake in Hulu.

Stephens also reminded analysts that with interest rates at historically low levels, combined with President Trump’s 40% cut to corporate tax rates, debt can be viewed from a different perspective.

“You lower your federal tax rate by 40%, it has an impact. And it’s real. And it’s economic. It’s cash,” Stephens said. “When you think about those two changes, I understand how people might have a differing view on leverage levels. We’re sticking to what we’ve told you and we’re really focused – laser focused on 2019 and getting it into that 2.5 range.”

 

 

Disney/Verizon Partnering for 5G Media, Entertainment

The Walt Disney Co. and Verizon Communications reportedly are partnering to explore entertainment and media opportunities in the nascent 5G wireless network platform.

5G claims to be able to deliver upwards of 10 gigabits of data per second, which could enable the downloading of a movie within seconds on a smartphone versus many minutes on 4G.

Disney’s upstart StudioLab unit is working with Verizon testing 5G applications for the distribution of content.

“We see 5G changing everything about how media is produced and consumed,” Jamie Voris, chief technology officer at Disney Studios, told Variety, which first reported the pact.

Verizon last October launched 5G network capability in four cities – a move rivaled by competitor AT&T. Still in the early stages of deployment and functionality, 5G marketing and hype – however – has shown no limits.

When AT&T recently changed the old 4G LTE logo to 5G on branded smartphones, Verizon (and T-Mobile) cried foul.

“The potential to over-hype and under-deliver on the 5G promise is a temptation that the wireless industry must resist,” Verizon wrote in a letter reported by Endgadget (which Verizon owns). “We’re calling on the broad wireless industry to commit to labeling something 5G only if new device hardware is connecting to the network using new radio technology to deliver new capabilities.”

T-Mobile, in a post on Twitter, was slightly less diplomatic, tweeting a video showing someone sticking a “9G” sticker on an iPhone with the following caption: “Didn’t realize it was this easy, brb updating.”

Indeed, without a 5G-capable phone, simply claiming to be able to deliver content faster over old technology is disingenuous.

“People need a clear, consistent and simple understanding of 5G so they are able to compare services, plans and products, without having to maneuver through marketing double-speak or technical specifications,” wrote Verizon.

 

 

 

 

 

 

AT&T Sells Data Center Assets in Further Debt Reduction Bid

AT&T Inc. Jan. 1 completed the sale of its data center colocation operations and assets to Brookfield Infrastructure and its institutional partners.

AT&T received $1.1 billion for the transaction to support the company’s goal of reducing its net debt-to-EBITDA-ratio to the 2.5x range by the end of 2019. AT&T, which owns WarnerMedia, ended 2018 with a debt ratio of 2.8. Wall Street looks for a company to have a debt ratio between 0.3 and 0.6, according to some analysts.

WarnerMedia, which is setting up its own subscription streaming service to compete with Netflix and Disney+, is reportedly interested in selling its 10% stake in Hulu as part of AT&T’s debt reduction initiative. WarnerMedia’s share could be worth about $1 billion.

AT&T expects to generate $1.5 billion in cost savings (corporate overhead, procurement purchasing, marketing, etc.) and another $1 billion in revenue savings (churn reduction, cross-selling products) by 2021, including $700 million in savings by the end of 2019, $2 billion by the end of 2020.

Brookfield has established a company called Evoque Data Center Solutions to own and operate the assets. Customer contracts, employees supporting the colocation operations, fixed assets, leases and specified owned facilities have been transferred to Brookfield.

Evoque joins AT&T’s global colocation ecosystem program offering business customers access to 350+ data centers around the world.

2018: Getting Along in a Multi-Platform World

Back in 1989, a State Department official named Francis Fukuyama wrote a controversial essay on the “end of history,” opining that the collapse of the Soviet Union and Eastern bloc communism, the reform movement in China, and the reunification of Germany signaled a triumph for Western democracy and a very real promise of freedom and liberty for all.

Fukuyama’s vision of a global utopia didn’t last long, but for a brief moment in time cultural and political differences seemed to be set aside in favor of everyone working together to make the world a better place.

Similarly, in 2018 the various factions in home entertainment seemed to set aside their differences and recognize that we’re living in a multi-platform world — and that a peaceful coexistence between disc and digital, subscription and transactional, was, indeed, possible.

“2018 saw the continued integration of technology and content at an even more accelerated pace, and, with that, the opportunity to engage fans with more focused and meaningful experiences that extend the life of our film and television properties,” said Keith Feldman, president of worldwide home entertainment for 20th Century Fox.

Indeed, studios cut back on selling content to Netflix — most notably Disney, which pulled all its movies off the service by the end of the year — in favor of issuing it on their own platforms. They rallied behind Movies Anywhere, a digital movie storage “locker” launched in October 2017, and saw digital movie sales soar, with an 18% gain reported in the third quarter of 2018, according to DEG: The Digital Entertainment Group numbers.

Netflix, meanwhile, vowed to spend $8 billion in 2018 on producing its own shows, with the goal of making its content library 50% original.

Studios that once sued Redbox for renting DVDs and Blu-ray Discs, claiming the kiosk vendor was cannibalizing disc sales, struck distribution deals in which prior holdbacks were either sharply cut back or eliminated. They also rallied behind Redbox On Demand, a digital movie store launched in December 2017.

On the retail front, big-box chains like Best Buy and Walmart put discs back into the spotlight, buoyed by the emergence of 4K Ultra HD Blu-ray.

And digital retailers like FandangoNow and Google Play revved up their promotional muscle and pumped up the message that they had fresh movies for sale or rent. FandangoNow even put up a notice on its home page, touting the fact that it offers “New releases not on Netflix, Hulu or Amazon Prime subscriptions.”

It was all part of a bigger picture, in a year dominated by major media mergers — AT&T buying Time Warner, Disney buying 20th Century Fox — suggesting it was high time to come together and restructure existing business models to reflect changing consumer habits.

Content, as always, was king, but the feuding fiefdoms of the past were at last coming to peace with each other — and with themselves.

Subscription streaming continued to dominate the home entertainment business in 2018. Indeed, in the first nine months of this year, according to DEG: The Digital Entertainment Group, consumer spending on Netflix and other subscription streaming services rose more than 30% to $9.4 billion, nearly $2 billion more than consumers spent on all other forms of home entertainment combined– disc purchases ($2.79 billion) and rentals ($1.37 billion); digital purchases, or electronic sellthrough (EST, $1.8 billion),  and digital rentals, or transactional video-on-demand (TVOD, $1.57 billion).

But where Hollywood once saw a threat, in 2018 the studios saw an opportunity. As consumers, thanks to streaming, became increasingly accustomed to viewing movies and other content electronically, studios focused on moving them toward on-demand digital purchases or rentals — driving home the message that new releases aren’t typically available through subscriptions.

“Our comprehensive and strategic efforts to drive digital ownership and bolster engagement such as leveraging the early window, offering exclusive extras and emphasizing the best viewing experience possible are proving to be very effective as consumers continue to move toward and embrace the digital experience,” said Chris Oldre, EVP of pay TV, digital and international distribution at Walt Disney Direct-to-Consumer and International.

“Movies Anywhere has had a tremendous impact on transforming digital consumption and is a testament to the strength of the studios and digital retailers that have joined forces on an unprecedented scale. This year Disney once again experienced remarkable growth as our digital sales exceeded expectations in conjunction with the studio’s unrivaled box office success. Disney has the top three bestselling digital titles to date with Avengers: Infinity War, Black Panther and Thor: Ragnarok. We’re also incredibly proud of our celebration of Marvel’s 10-year anniversary this year.  We promoted the Marvel Cinematic Universe home entertainment catalog with a special sales promotion across digital, which undoubtedly helped propel Avengers: Infinity War to the No. 1 live-action spot on the all-time digital sales chart in a record-setting period.”

Ron Schwartz, president of Lionsgate Worldwide Home Entertainment, said that as consumer habits evolve, digital movie sales and rentals – electronic sellthrough (EST) and transactional video-on-demand (TVOD) — remain a priority. “We saw a significant increase in industry spending in this area in 2018, up 20%, and we will continue to collaborate with our retail partners on fresh ideas to keep consumer interest alive,” he said. “We see a large and growing market with multi-platform and specialty releases and will continue to build our leadership in this area.”

At the same time, Schwartz notes, “Disc sales remain robust … 4K UHD BD is rapidly gaining in popularity, as spend is on track to double this year versus last. We are committed to serving our audiences across the full spectrum of the digital   and physical business and we will continue to be a first mover in adapting these businesses as they continue to evolve.”

For Bob Buchi, president of worldwide home media distribution at Paramount Pictures, 2018 was the year of 4K.

“More than 42 million homes now have a 4K Ultra HD television and roughly 400 titles are available on 4K Ultra HD Blu-ray Disc and over 600 on Digital 4K,” Buchi said. “The numbers keep growing and for good reason: 4K brings home entertainment to life like never before, delivering content that better represents filmmakers’ original vision.  We’ve seen this play out with the week one 4K sales of Mission: Impossible — Fallout, which delivered our highest number of UHD discs sold, as well as the highest percentage of our physical sales ever.”

Disney’s Oldre agrees. “4K Ultra HD is a robust line of business for us and we’re experiencing healthy growth,” he said. “We continue to receive solid support from our physical retail partners and are confident it’s a market that our customers will continue to embrace given the format’s premier resolution.”

Catalog sales were another bright spot in 2018, Buchi said. “We’ve seen our digital catalog sales growing in markets around the world, including a 35% increase domestically through October, which indicates that more and more consumers have become comfortable with the format and are returning to the concept of building collections.  In addition, physical catalog sales have exceeded our expectations, as we continue to make concerted efforts to celebrate anniversaries of classic titles and strategically promote films from our library.”

Retailers certainly did their part in pushing the transactional business. At Best Buy and Walmart, the emergence of 4K Ultra HD Blu-ray led to bigger disc sections and, in the case of Best Buy, placement back in the center of the store.

Redbox in 2018 relaunched its brand, which included some major ad campaigns and sponsorships, including the Redbox Bowl college football game on New Year’s Eve at Levi’s Stadium in Santa Clara, Calif. The company also revamped its loyalty program; negotiated more favorable distribution deals with studios; and expanded the availability of previously rented movies and video games at kiosks.

The Redbox On Demand digital service, meanwhile, celebrated its first birthday in December with a new app on Vizio SmartCast TVs. The company also expanded its selection to 12,000 titles, from 7,000 at launch. CEO Galen Smith in December told Media Play News that Redbox On Demand has “surpassed major milestones to become a real player in the competitive digital home entertainment space. We’re seeing hundreds of thousands of customers, including bringing back folks we haven’t seen in a while.”

FandangoNow, a business unit of movie-ticket seller Fandango, struck deals with most major studios that allow it to package movie rentals into “binge bundles” that let consumers watch multiple movies at a lower price. The new offering launched on the Labor Day weekend with more than 100 bundles.

FandangoNow also cross-promotes digital movie sales and rentals with ticket sales. In December, just before the holidays, consumers who spent $20 on FandangoNow received $8 toward a movie ticket.

In the end, studio executives agree, it all comes down to keeping consumers engaged — which requires constant work.

“From a functional solution like Movies Anywhere that allows consumers to build and enjoy a streamlined digital library, to premium viewing with 4K HDR, to story extensions through virtual reality and other emerging formats, keeping consumers invested and engaged requires constant experimentation and innovation,” says Fox’s Keith Feldman. “Our ongoing challenge is to exceed consumer expectations today and simultaneously deliver next-generation offerings that will continue that engagement in the future.”

AT&T’s John Donovan to Deliver Keynote on 5G Opportunities at CES

AT&T Communications CEO John Donovan will lead a keynote session titled “New Frontiers in Mobile” at CES 2019, the Consumer Technology Association announced.

Donovan will join MediaLink Chairman and CEO Michael Kassan to discuss opportunities for 5G, the next generation technology for mobile.

Owned and produced by CTA, CES 2019 takes place Jan. 8-11 in Las Vegas. The keynote will begin at 2 p.m. Jan. 9 at the Park Theater, MGM Park.

Presented by MediaLink, the keynote will explore how 5G will open up opportunities for robotic manufacturing, AR/VR and mixed reality, sporting experiences and public safety, among other industries. After Donovan’s talk, a panel of industry executives will discuss how global companies are developing marketing strategies to best engage consumers in this mobile, data-driven world. Confirmed keynote panelists include National Geographic CMO Jill Cress, Deloitte Digital CMO Alicia Hatch, Magic Leap CPO Omar Khan, Adobe CMO Ann Lewnes, The Stagwell Group president and managing partner Mark Penn, and Ascential Events president and Cannes Lions chairman Phil Thomas.

“AT&T is a leader in the next-generation of connected mobility that will impact every aspect of our lives, and 5G is the platform that will enable that transformation,” said Gary Shapiro, president and CEO, CTA, in a statement. “We are excited to have John Donovan and Michael Kassan lead this powerful CES keynote that will delve into the new world of 5G innovation and the next wave of connectivity.”

Donovan is responsible for the bulk of AT&T’s global telecommunications and U.S. video services businesses, including its Business, Mobility and Entertainment, and Technology & Operations groups, according to a CTA press release. Previously, Donovan served as chief strategy officer and group president, AT&T Technology and Operations, where he led strategic planning for the company overall.

Kassan founded MediaLink in 2003, a strategic advisory firm serving companies at the intersection of media, marketing, advertising, technology, entertainment and finance.

AT&T Launching First Domestic 5G Mobile Network Dec. 21

AT&T, beginning Dec. 21, says it will become the first telecom in the United States offering 5G wireless service over a commercial, standards-based mobile 5G network.

The initial launch is limited to 12 cities, which include Atlanta, Charlotte, N.C., Dallas, Houston, Indianapolis, Jacksonville, Fla., Louisville, Ky., Oklahoma City, New Orleans, Raleigh, N.C., San Antonio and Waco, Texas.

“This is the first taste of the mobile 5G era,” Andre Fuetsch, president, AT&T Labs and chief technology officer, said in a statement. “Being first, you can expect us to evolve very quickly. It’s early on the 5G journey and we’re ready to learn fast and continually iterate in the months ahead.”

Observers contend 5G could have a significant impact on home entertainment.

Over the next decade, media and entertainment companies will be competing to win a share of a near $3 trillion cumulative wireless revenue opportunity, according to the recently released “5G Economics of Entertainment Report” commissioned by Intel and conducted by Ovum.

The report says that as early as 2025, 57% of global wireless media revenue will be generated by using the super-high-bandwidth capabilities of 5G networks and the devices that run on 5G. The low latency of these networks means that video won’t stall or stop — livestreaming and large downloads will happen in the blink of an eye.

AT&T, which owns WarnerMedia, said that in the first half of 2019 it plans to deploy mobile 5G in seven additional cities: Las Vegas, Los Angeles, Nashville, Orlando, San Diego, San Francisco and San Jose, Calif.

“As the ecosystem evolves, this technology will ultimately change the way we live and conduct business,” said Mo Katibeh, chief marketing officer, AT&T Business. “We expect that our initial adopters will be innovative, growing businesses. They’re the starting point for what we think will be a technology revolution like we’ve never seen before.”

Through an initial offer, select businesses and consumers will have access to mobile 5G device plus 5G data usage at no cost for 90 days. It gets pricey thereafter. Next spring, customers will be able to get access to AT&T’s 5G mobile hotspot device, Nighthawk (manufactured by Netgear), for $499 upfront fee and 15GB of data plan, which starts at $70 a month with no annual contract.

Fox Innovation Lab Releases 5G Study on U.S. Open Trial

The Fox Innovation Lab has released a 5G study with Fox Sports, Intel, AT&T and Ericsson, highlighting the project at this year’s U.S. Open Golf Championship.

5G is the next-generation mobile technology.

The study, “5G at the U.S. Open: Live Streaming Without the Handicap,” outlines the results of the companies’ trial in June to put 5G to the test, streaming 4K video to Fox Sports national broadcast. The study reveals how the companies were able to deliver higher amounts of data with no delay and remove the cost of running fiber around the Shinnecock Hills golf course and reduce personnel and equipment needed on site. The study also showed the process could improve backhaul transmission costs to the distribution center. 

“While this was a fairly simple trial, it indicated that 5G is a technology that could drive the savings of millions of dollars over the course of a production year in terms of fiber deployment and backhaul transmission, after it is fully deployed over multiple types of sports broadcasts,” stated Mike Davies, FOX Sports SVP of technical and field operations, in the report. 

“From the Lab to on-location, we worked with our partners to integrate the capabilities of 5G into the workflow of a large-scale sports production, resulting in performance learnings that inform future, more complex use cases,” stated Danny Kaye, EVP of 20th Century Fox and managing director of the Fox Innovation Lab.

Federal Appeals Court Questions DOJ Economic Concerns Regarding AT&T/Time Warner Union

Federal Appeals Court judges Dec. 6 questioned lawyers representing the Department of Justice about the government’s economic concerns regarding AT&T’s $85 billion acquisition of Time Warner.

The Justice Department’s antitrust division filed an appeal of a district court judge’s June approval of the merger that resulted in the formation of WarnerMedia — citing the deal would lead to higher pay-TV pricing and content blackouts for consumers, among other issues.

Government attorney Michael Murray argued U.S. District Court Judge Richard Leon erred in “economic logic and reasoning” in relation to possible blackouts of consumer access to content occurring during carriage disputes between content holders and pay-TV and over-the-top video distributors.

“‘Incentives remain the same’ for a super company to threaten a ‘blackout,’ in which it withholds content from distributors, in order to cripple rivals,” said Murray, as reported by CNN Business.

But D.C. Circuit Court of Appeals Judge Robert Wilkins countered that there exist arbitration procedures in place for carriage disputes  — systems Wilkins said Judge Leon used in his decision.

“So how can we just ignore that and say the district court has irrationally switched positions?” asked Wilkins.

Speaking Dec. 4 the UBS 46thAnnual Global Media and Communications confab in New York, AT&T Randall Stephenson remained optimistic the appeals court would validate the merger.

Specifically, Stephenson said the appellate court is looking for errors in law, not whether the district court judge “gets the facts right or not.” He said AT&T hired appellate lawyers during the original trial to consult on the strength of their case as it applied to the rule of law.

“We feel like Judge Leon wrote a pretty tight order and it was an order that was very fact-specific to the AT&T/Time Warner case, and so we feel like we have an order that should stand up well in the appellate review,” Stephenson said. “And so, we’re anxious to get this piece of it behind us.”

 

FCC: Nearly Half of 22 Million Public Comments on Net Neutrality Fake

During the 2017 run-up to the Federal Communication Commission’s repeal of net neutrality guidelines enacted in 2015 during the Obama Administration, the agency solicited public comments on the proposed decision not to treat the Internet as a public utility.

The FCC on Dec. 14, 2017 voted 3-2 along party lines to nullify the Open Internet Order affirmed under previous chairman Tom Wheeler. In doing so, Internet service providers such as Comcast, AT&T, Verizon and Charter were no longer prohibited from charging online streaming services such as Netflix market rates for broadband access, among other issues.

In new FCC disclosures following Freedom of Information Act requests by The New York Timesand other media groups, it was revealed that nearly 11 million of the 22 million comments received online regarding net neutrality were fraudulent, including 500,000 comments received from Russian sources.

The revelation underscores the widespread influx and influence social media can have on more than national elections. Indeed, about 8 million fake comments originated from domain sites associated with FakeMailGenerator.com. Another 2 million comments used stolen identities.

FCC Chairman Ajit Pai, in a statement to Congress, claimed that much of the “overheated rhetoric” against his proposed net neutrality rollback originated from fraudulent sources. In fact, most of the authentic comments reportedly consisted of form-letter responses.

Regardless, the New York State Attorney General’s Office in October opened an investigation to the fake comments, including subpoenaing public action groups on both sides of the issue.