AT&T CFO: $500 Million Invested in HBO Max Content Through Q4

During AT&T’s HBO Max Day last year, senior executives said WarnerMedia planned to spend upwards of $1.5 billion on content for the SVOD service launching in May with about 10,000 hours of programming.

Speaking Jan. 8 at Citi 2020 Global TMT West Conference in Las Vegas, AT&T CFO John Stephens said WarnerMedia spent $500 million on Max content through the end of the fourth quarter (Dec. 31, 2019) largely through acquiring rights to notable content, including exclusive streaming rights to “Friends,” “The Office,” “Doctor Who,” “Luther,” as well as two original movies from Reese Witherspoon’s production company and four from “Riverdale” producer Greg Berlanti. Anna Kendrick is slated to star in a romantic comedy series called “Love Life.”

“We’ve made that investment in HBO Max by holding back some really, really high-quality content so that we can use it,” Stephens said. “And we feel really good about it.”

Follow us on Instagram

The executive expects Max to sign up 10 million initial subscribers by segueing new AT&T customers to the service through commercial tie-ins and cross-promotions.

“We’re working to get it so they can sign right into HBO Max. We’re very hopeful,” Stephens said.

He said the company has a good track record attracting consumers to HBO, including about 30 million subscribers paying the identical $15 monthly (twice the Disney+ fee) Max fee through pay-TV distributors.

Subscribe HERE to the FREE Media Play News Daily Newsletter!

“We’ve got the greatest market study out there,” he said. “We know what the price is, what [an appropriate] price point is, and [Max] is a much higher quality.”

Stephens was alluding to pay-TV distributors offering Max to linear subscribers — heretofore a contradictory situation since one channel would appear to infringe upon the other.

“We certainly want to work closely with them because we think [Max] provides a great stickiness to all the products that are out there,” he said.

The executive said WarnerMedia would produce “really high-quality content,” including shows targeting a “different demographic,” a series of female leads and other demographics.

“We did a great job of holding on to those customers,” Stephens said. “We have confidence that the quality of the content that can be developed by our team is there and can retain customers and interest customers and recruit customers. And so now we just need to make that a key part, and I think [we have] clearly done that.”

HBO in September acquired the Hugh Jackman dark comedy Bad Education at the Toronto Film Festival for $20 million.

AT&T Bows ‘Pause Ads’ on Streaming Video Content

As expected, AT&T has formally begun selling ads to SVOD, on-demand VOD and DVR users in an effort to mine incremental revenue from the burgeoning over-the-top video market.

Xandr, AT&T’s advertising company, Jan. 8 announced the launch of Pause Ads, which it claims “complement,” rather than disrupt, the viewing experience by leveraging the native functionality of the “pause” button, since consumers only see the ads when they take a break from the content they’re watching.

AT&T launched Xandr in September 2018 following the acquisition of AppNexus.

Follow us on Instagram

“Our findings indicate that consumers aren’t anti-advertising. They’re pro-content, as long as it’s relevant and non-disruptive to them,” Matt Van Houten, SVP of product development for Xandr, said in a statement.

Van Houten said internal research found that 73% of consumers surveyed dislike ads that interrupted programming. But an ad that appears when the viewer hits the pause button is different.

“[It’s] very much about the right message at the right time,” he said.

Pause Ads are enabled within live, video on-demand and DVR programming across cable, broadcast and premium networks on both digital and satellite. AT&T is including beta ads within mobility, Epix and Starz (owned by MGM and Lionsgate, respectively), AT&T TV Now and select DirecTV households.

Subscribe HERE to the FREE Media Play News Daily Newsletter!

Because Pause Ads aren’t tied to standard, 15 or 30-second pods, brands have more opportunities to reach their audiences with relevant advertising in a non-intrusive way, according to AT&T. Beta ads are featured in animated formats without sound that are intended to be “visually engaging,” while remaining “respectful” of the viewer.

Indeed, Disney-owned Hulu has begun testing pause ads this year and shown a positive response from viewers, according to Jeremy Helfand, VP and head of advertising platforms.

“As binge-viewing happens more and more, it’s natural [viewers] are going to want to pause,” Helfand said in a separate media interview.

AT&T, citing internal research, found 66% of consumers want ads that are more relevant to their interests and lifestyle, and that 57% feel ads are not relevant to them.

Citing increased concerns about SVOD fee fatigue among consumers, Brian Lesser, CEO of Xandr, contends the OTT world needs advertising “more than ever” to offset subscription pricing.

“We just need to make it more relevant,” he said.

 

Sony Pictures Entertainment Takes Full Ownership of Game Show Network

Sony Pictures Entertainment has acquired AT&T’s minority stake in Game Show Network for $500 million, the two companies announced.

SPE now owns 100% of the multimedia entertainment company offering original and classic game programming to millions of subscribers through the U.S.-based cable network. It also offers online and mobile games to millions of users through GSN Games. Following the transaction, the Game Show Network channel will continue to be carried on DirecTV.

Prior to the transaction, SPE owned a 58% stake in Game Show Network, and AT&T owned the remaining 42%.

Game Show Network will continue to be managed by Sony Pictures Television with Mark Feldman continuing as president and CEO of the multimedia outlet.

Subscribe HERE to the FREE Media Play News Daily Newsletter!

“We’re excited to bring Game Show Network fully into the Sony Pictures Entertainment portfolio,” said Mike Hopkins, chairman, Sony Pictures Television, in a statement. “The acquisition allows us to work more closely with the company’s talented team to deliver the best iconic game shows, develop and syndicate new game show IP for audiences across the nation, as well as to advance the fast-growing GSN Games business, all of which directly aligns with our strategy of developing targeted direct-to-consumer offerings.”

Game Show Network television programming includes originals such as “America Says,” “The Chase,” “Common Knowledge” and “Catch 21,” syndicated shows including “Wheel of Fortune” and “Family Feud,” and classics including “The $25,000 Pyramid” and “Card Sharks.” GSN Games’ collection of mobile games includes GSN Casino, Bingo Bash, Wheel of Fortune Slots, Solitaire TriPeaks and WorldWinner.

Warner Bros. Changes Iconic Studio Water Tower Logo for HBO Max Unveiling

In advance of the the Oct. 29 afternoon WarnerMedia Day unveiling further details on the HBO Max subscription streaming video platform, Warner Bros. has changed the logo on its iconic studio water tower.

“This is a big deal,” AT&T CEO Randall Stephenson told the media from the Warner lot for the Oct. 28 fiscal call. “You’re going to see the result of something that a lot of people said couldn’t be done when we did the Time Warner deal, and that is, breaking down the three silos within Time Warner.”

Subscribe HERE to the FREE Media Play News Daily Newsletter!

AT&T acquired Time Warner for $85 billion, which when including the company’s debt, totaled more than $108 billion.

“Bringing these three companies together, we’re creating something really, really powerful together that could not have been done otherwise,” Stephenson said. “The idea that you can stand up a product, HBO Max, that requires in-depth integration of HBO, Warner Bros. and Turner, not to mention Otter Media, which is a big part of this as well — man, a lot of people said it couldn’t be done. This is exciting.”

HBO Max to Include Live Streaming — in the Future

Heading into WarnerMedia Day on Oct. 29 for the official unveiling of pending subscription streaming video product HBO Max, AT&T CEO Randell Stephenson said the service over time would deliver live-stream television.

Reiterating that HBO Max, which launches in early 2020, would not replicate Netflix, Stephenson said the platform would instead offer live TV similar to online services such as Sling TV.

“So you want an SVOD service, HBO Max is great. Over time, we look forward to bringing in a live element as well,” he said.

Stephenson said the company hopes to soon focus on a traditional satellite TV business, which he contends will be there “for a long time,” and the HBO Max platform.

Subscribe HERE to the FREE Media Play News Daily Newsletter!

Streamlining video is part of management’s goal over the next three years to aggressively reduce the  massive debt load (more than $160 billion) following (i.e. costly) acquisitions of DirecTV ($67 billion) and Time Warner ($108 billion) — both including debt.

Speaking on the Oct. 28 fiscal call, CFO John Stephens said WarnerMedia CEO John Stankey has been tasked with generating 200 basis points (2%) of margin expansion in video going forward. To do that, the company is narrowing its focus on HBO Max and AT&T TV Now (formerly DirecTV Now) in an effort to mine 1% to 2% out of cost-of-equity (COE) per year, according to Stephens. COE is the return a company requires to decide if an investment meets capital return requirements.

“If we can mine that out of our COE every year, that’s $1.5 billion to $2 billion [in savings],” he said.

HBO Max Eyeing 80 Million Subs by 2025

With several high-profile over-the-top video services launching next month, WarnerMedia’s pending HBO Max service is looking to cut through the clutter with bold subscriber predictions.

HBO Max, which doesn’t launch until Q1 2020, is eyeing 80 million subscribers by 2025 — including 50 million in the United States, CEO John Stankey told Reuters. He plans to roll HBO’s 35 million pay-TV subs into the service — a significant challenge considering  HBO’s existing pay-TV license agreements.

John Stankey

The service, which will feature traditional HBO content, movies, original programming and “Friends” reruns, will be made available at launch free to AT&T’s HBO pay-TV subscribers.

“The success of HBO Max is built on the ability for the company to rationalize why [AT&T’s DirecTV and Time Warner] belong together,” Stankey said earlier this year.

AT&T, which is holding a Warner Media Day on Oct. 29 to discuss HBO Max, hasn’t disclosed a price for the service. It will reportedly offer an ad-supported cheaper option in 2021 similar to what Hulu offers.

Subscribe HERE to the FREE Media Play News Daily Newsletter!

 

CNN Launching Digital News Service

WarnerMedia’s CNN property is reportedly readying a standalone subscription based news service that would target the news organization’s online  audience — and also pay third-party news sources.

The move comes after Rupert Murdoch’s News Corp. subsidiary announced plans to launch Knewz.com, which seeks to aggregate third-party and original content.

As more people seek out world and local news online, TV news departments and print publications are melding operations internally with over-the-top video platforms to compete with social media platforms such as Facebook and YouTube.

While CNN lags behind Fox News in monthly pay-TV viewership, it bests the Rupert Murdoch property online with 130,000 more unique eyeballs per month than Fox, according to comScore.

“In the same way that entertainment companies don’t want to cede ground to the streaming platforms, why should we cede the ground of journalism to the technology platforms,” CNN digital chief Andrew Morse told The Information.

AT&T Hosting ‘WarnerMedia Day’ Oct. 29 to Showcase HBO Max

With Disney and Apple launching branded subscription streaming video services next month, AT&T is holding an investor event Oct. 29 to showcase HBO Max — the SVOD platform bowing in early 2020.

WarnerMedia Day  will take place at 6 p.m. EST. At the event, the company will discuss plans for its new direct-to-consumer streaming service, including financial expectations for the new service.

Subscribe HERE to the FREE Media Play News Daily Newsletter!

A live webcast of the call will also be available at the AT&T investor relations website and a replay will be available shortly after the call concludes.

WarnerMedia was created following AT&T’s $85 billion acquisition of Time Warner, and includes Warner Bros., HBO and Turner.

 

‘Last Week Tonight’ Host John Oliver Mocks HBO Max

British comic John Oliver has never shied away from calling out perceived hypocrisy within corporate America, social media and politics — even if it includes his network employer.

His weekly satirical look at events and newsmakers has made HBO’s “Last Week Tonight with John Oliver” a critical success at industry awards, including winning multiple Primetime Emmy Awards.

On the Oct. 13 broadcast, Oliver included a segment on the NBA’s political entanglement with China and issues involving pro-democracy forces in the semi-autonomous Chinese region of Hong Kong.

Specifically, the NBA has recently found itself in hot water with China after the GM of the Houston Rockets “liked” a social media tweet, “Fight for Freedom. Stand with Hong Kong,” indicating solidarity with the protestors.

In response, Chinese media announced it would not air or stream NBA games in the quasi-Communist country, and two major retailers pulled Rockets apparel from store shelves.

Subscribe HERE to the FREE Media Play News Daily Newsletter!

Significant moves considering the NBA has business deals worth upwards of $4 billion in the Peoples Republic.

Oliver then showed a corny clip of NBA stars celebrating the Chinese New Year with the following retort: “There’s just nothing more cringeworthy  than watching someone forced to engage in promotional bullshit to appease  the whims of their parent company.”

Oliver then spun his chair 45 degrees, and with a glazed look in a monotone voice recited a PR plug for the pending subscription streaming video platform, HBO Max.

“Have you heard of HBO Max? Looking to add another app and monthly charge to watch things?,” Oliver deadpanned. “HBO Max has you covered. It’s going to have all your favorites: Reruns of ‘The Big Bang Theory,’ reruns of ‘Friends,’ reruns of ‘The Fresh Prince of Bel Air’. You can pay for all of those through HBO Max. HBO Max. It’s not HBO. It’s just TV.”

HBO Max launches in early 2020.

 

Private Equity Group Looking to Acquire DirecTV and Dish Network

Private equity firm Apollo Global Management is reportedly negotiating to acquire AT&T’s satellite TV service, DirecTV, along with competitor Dish Network.

The complicated transaction would enable AT&T to offload about $20 billion in debt, while maintaining control of the satellite service. It would also allow Dish Network CEO Charlie Ergen to unload the company’s declining pay-TV business, according to Fox Business, which first reported the story based on information from sources familiar with the situation.

Ergen, who has recently moved the company’s focus toward wireless networks and 5G, has made no secret his desire to combine the two satellite businesses.

Subscribe HERE to the FREE Media Play News Daily Newsletter!

AT&T, which acquired DirecTV in 2015 for $49 billion, also purchased Time Warner for $85 billion, sending its debt load into the stratosphere.

Apollo, which has about $250 billion in its asset portfolio, would provide financing for the deal in exchange for a minority stake in the combined entity. The firm specializes in leveraged buyout transactions and purchases of distressed securities involving corporate restructuring, special situations, and industry consolidations.  Its holdings include Caesars Entertainment Corporation, CareerBuilder,  ADT and Rackspace.

AT&T told Fox it has received the offer but that there were no active discussions at this time.

COO John Stankey, who is also CEO of WarnerMedia, last month reiterated AT&T’s support DirecTV and over-the-top video unit, AT&T TV Now.

“We’re constantly looking at the [business] portfolio,” Stankey told The Wall Street Journal. “That’s the normal course of business and it’s not unique to DirecTV.”