AT&T CEO: WarnerMedia Looking to Partner SVOD Service With Pay-TV Operators

WarnerMedia’s pending fourth-quarter soft-launch of a branded subscription streaming video service will look to partner with — rather than antagonize — third-party pay-TV operators.

Speaking May 14 at the JPMorgan Global Technology, Media and Communications  Conference in New York, Randall Stephenson, CEO of AT&T, said the service would be centered around HBO and be included with a pay-TV subscription.

“The MVPDs, Comcast, we think are going to be an important partner to all of this,” Stephenson said. “If you’re a Comcast subscriber and you acquire HBO, you will get this [OTT video] capability with your HBO subscription on Comcast.”

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The proposed symbiotic relationship between SVOD and linear television distribution is significant considering the former was launched in part to replace pay-TV.

Indeed, Dish Network launched pioneering Sling TV in 2015 in an effort to offset declining satellite TV subscribers. AT&T followed with DirecTV Now.

Yet, online TV subscriber growth has cooled. Sling added just 7,000 subscribers in the most-recent fiscal period, and DirecTV Now lost 83,000 subs compared to a gain of 312,000 subs last year.

Stephenson said the new SVOD service is projected to generate “tens of millions of subs” — a figure dependent upon AT&T sustaining its base of DirecTV and U-verse subscribers.

The strategy is not dissimilar with Comcast, which plans to launch an OTT service free to Xfinity subscribers, with non-subscribers charged a monthly fee.

“Keeping the satellite, the U-verse customer base in check and stable is really important because it’s going to be a major distribution platform [for SVOD],” Stephenson said. “And then we want to just continue to push digital distribution on top of that as well.”

Much of that distribution will be centered around HBO, which is currently generating strong viewership through the last season of “Game of Thrones”.

Stephenson said content investment at HBO has “stepped up considerably” this year with the second seasons of “Big Little Lies” and “Succession” slated to follow “Thrones,” in addition to new series, “Chernobyl”.

“We’ve got a lot of really great content coming online as ‘Game of Thrones’ winds down,” he said.

Epix Coming to DirecTV and DirecTV Now

Epix, the premium TV network owned by MGM, and AT&T have reached a distribution agreement that will make Epix available on a subscription basis to DirecTV customers for $5.99 a month beginning May 19.

The network will also be available soon on the streaming service DirecTV Now, according to an Epix press release.

Terms of the agreement were not disclosed.

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“We are thrilled to expand our relationship with AT&T and make our growing slate of original programming and Hollywood movies accessible to viewers across the DirecTV universe,” said Michael Wright, president of Epix, in a statement. “It’s an exciting moment of growth for us as we build a brand that delivers a superior customer experience with high-powered, premium original series to a new audience on DirecTV and DirecTV Now.”

“AT&T has been a tremendous partner of ours over the years,” said Monty Sarhan, EVP and GM of Epix, in a statement. “We are extremely excited about launching on DirecTV and expanding Epix’s availability nationwide. This is an incredibly important platform for us and a truly momentous launch for our network.”

“We are pleased to add Epix to our vast content offering in the premium TV category. With its growing lineup of original programming, Epix is a great addition for our DirecTV customers,” said Dan York, senior EVP and chief content officer for AT&T, in a statement.

Epix will provide DirecTV subscribers access to the upcoming premieres of original series “Godfather of Harlem,” starring and executive produced by Forest Whitaker; “Pennyworth,” the origin story of Batman’s butler Alfred, from Warner Horizon and DC; “Perpetual Grace, LTD,” from MGM and featuring Sir Ben Kingsley; “Belgravia,” from Julian Fellowes; docu-series “Slow Burn,” based on the hit podcast;  and a weekly series, “NFL: The Grind,” from NFL Films. Epix also has original series “Get Shorty,” “Deep State,” “Elvis Goes There” and “PUNK” as well as more than 2,000 Hollywood movies.

Comcast in Talks with Disney to Sell Hulu Stake

Comcast reportedly is in talks with Disney to sell its 30% stake in Hulu, which includes online television platform Hulu with Live TV, according to CNBC, which cited internal sources.

CNBC is owned by Comcast business unit NBC Universal.

Disney currently owns 60% of the 12-year-old streaming service with 25 million subscribers after it acquired 20th Century Fox. AT&T’s WarnerMedia unit just sold its 10% stake back to Hulu for $1.43 billion.

The discussions, which CNBC said are in the preliminary stage, were revealed hours after Comcast chairman/CEO Brian Roberts told investors the cable giant enjoyed owning a large stake of a Disney asset.

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“On Hulu, the relationship with NBC, it’s very much in everybody’s interest to maintain,” Roberts said on the all. “And we have no new news today on it, other than it’s really valuable. And we’re really glad we own a large piece of it.”

At the same time, with Disney firmly in control of Hulu and Comcast heretofore reluctant to move too far away from the pay-TV business model, selling its stake in an over-the-top business could help Comcast alleviate more than $100 billion in corporate debt following the $39 billion Sky acquisition.

Comcast reportedly could get $4.5 billion for its stake in Hulu, which lost $1.5 billion in 2018. Disney doesn’t expect Hulu to become profitable until 2024 — and only after possible international expansion.

At the same time, NBC Universal CEO Steve Burke remains skeptical of OTT business model, including Netflix.

“To be worth $150 billion, someday you’ve got to make at least $10 billion in EBITDA,” Burke told CNBC last year. “There’s at least a chance Netflix never makes that.”

Comcast, which only recently incorporated direct access to Netflix for its Xfinity pay-TV subscribers, plans to launch an OTT service for Xfinity in 2020.

AT&T CFO: 27 Million People Watched ‘Game of Thrones’ Season 8 Premiere

Viewership data for the final season of HBO’s hit fantasy drama “Game of Thrones” keeps growing.

Speaking on the April 24 fiscal call, AT&T CFO John Stephens said more than 27 million watched the premiere episode of season eight across all platforms, including subscription streaming video service HBO Now.

“Those numbers will show up in the second quarter customer accounts,” Stephens said.

HBO originally said 17.4 million people watched the episode on the pay-TV channel.

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Stephens said the series helped HBO Now generate record new subscribers in the days before the premiere episode.

Meanwhile, AT&T said the $85 billion acquisition of Time Warner continues to positively affect the telecom’s bottom line.

New business unit WarnerMedia, which includes Warner Bros., HBO, Turner, AT&T’s regional sports network and Otter Media Holdings, reported first-quarter (ended March 31) operating income of more than $2.2 billion on revenue of more than $8.3 billion.

Warner Bros. saw operating income increase $164 million on revenue of $3.5 billion — the latter up from $3.2 billion in the previous-year period.

HBO saw operating income increase $32 million on revenue of $1.5 billion, down from revenue of $1.6 billion last year.

Turner saw operating income increase $82 million on revenue of $3.4 billion, down from revenue of $3.5 billion last year.

Finally, WarnerMedia confirmed an agreement with an affiliate of Related Companies to sell its office space at 30 Hudson Yards for about $2.2 billion.

The transaction is expected to close in late second-quarter 2019. AT&T will use proceeds from this transaction, along with additional planned sales of non-core assets, to reduce its $180 billion debt load following the Time Warner acquisition.

WarnerMedia earlier sold its 10% in Hulu to the Disney-controlled platform for $1.43 billion.

AT&T hopes to end fiscal 2019 with about $150 billion in debt.

AT&T Loses 544,000 Q1 Video Subs; Another 83K DirecTV Now Subs Depart

AT&T’s pay-TV and online TV businesses continue to reflect ongoing challenges as consumers migrate away from the traditional cable bundle toward an increasingly fragmented over-the-top video market.

The telecom April 24 reported it lost 544,000 pay-TV subscribers in the first quarter (ended March 31) — up 190% from a loss of 187,000 video subs during the previous-year period.

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AT&T ended the period with more than 22.3 million pay-TV subs, which includes satellite operator DirecTV and U-verse. That’s down more than 1.5 million combined subs from 2018.

Meanwhile, DirecTV Now — AT&T’s much-hyped standalone online TV service – lost 83,000 subscribers compared to a gain of 312,000 subs during the previous-year period.

The streaming service ended the period with 1.5 million subs compared to 1.46 million subs last year.

AT&T CEO Randall Stephenson attributed DirecTV Now sub losses to weaning out early subscribers paying the introductory $34.99.

‘We’ve seen the effect of that in the fourth quarter and the first quarter,” he said. “Second quarter you’ll see that moderate, and I actually believe second half of the year base of what we’re seeing in terms of uptake in the market on the new platform and the new product. We should have a decent second half of the year on DirecTV Now.”

Hulu Buys Back AT&T’s Minority Stake for $1.43 Billion

As expected, AT&T has sold its minority stake in Hulu back to the streaming video joint venture, according to a joint press release from AT&T and Hulu April 15.

The deal leaves the Walt Disney Co. and Comcast as owners of the SVOD and online TV service, Hulu with Live TV.

The transaction valued Hulu at $15 billion, with AT&T’s 9.5% interest valued at $1.43 billion, according to the joint press release. The transaction did not require any governmental or other third-party approvals and was simultaneously signed and closed, according to the release.

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AT&T will use proceeds from this transaction, along with additional planned sales of non-core assets, to reduce its debt, according to the release.

“We thank AT&T for their support and investment over the past two years and look forward to collaboration in the future. WarnerMedia will remain a valued partner to Hulu for years to come as we offer customers the best of TV, live and on demand, all in one place,” Hulu CEO Randy Freer said in a statement.

The transaction comes less than three years after Time Warner acquired the 10% stake in Hulu for $583 million, which at the time valued the SVOD service at $5.8 billion.

After AT&T acquired Time Warner for $85.4 billion, the telecom was left with about $180 billion in debt. The Hulu asset sale is part of management’s plans to reduce debt by $12 billion in 2019, on top of the $9 billion cut last year.

 

 

 

WarnerMedia CEO John Stankey Blasts HBO Europe Sale Speculation

Following AT&T’s $85 billion acquisition of Time Warner, the company was left with more than $170 billion in debt. Senior executives have publicly stated that reducing  the company’s debt load by $20 billion is a primary goal in 2019.

That apparently does not include selling off HBO operations in Europe.

WarnerMedia CEO John Stankey has denied a Financial Times report suggesting the unit responsible for “Game of Thrones” and other programming was being sold.

HBO Europe has about 10 million subscribers across Scandinavia, Spain and Poland.

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“We normally do not comment on speculation, but when a news outlet is advised that their reporting is factually incorrect and report it anyway, we feel compelled to set the record straight,” Stankey said in a statement. “There is no truth whatsoever to the Financial Times’ story saying AT&T is or has considered selling HBO Europe. It’s completely baseless and inaccurate. HBO Europe is a valuable asset for our growth plans in Europe.”

Regardless, HBO has seen high-level staffing changes, including the departures of longtime CEO Richard Plepler, chief digital officer Diane Tryneski, chief revenue officer Simon Sutton, Kary Antholis, president of HBO miniseries and Cinemax programming, Rebekka Rockafeller, SVP of digital products, and Gilman Wong, VP of digital products and chief architect.

Earlier this year, AT&T sold office space in Manhattan, N.Y. in a deal reported to top $2 billion.

WarnerMedia reportedly is leasing back the 1.5 million square feet of office space at 30 Hudson Yards, which includes an observation deck on the 100thfloor — the highest in the Western Hemisphere.

 

Law Firm Investigating AT&T for Allegedly Misleading Investors About DirecTV Now Subscriber Growth

A law firm specializing in filing litigation against publicly-held corporations, is seeking plaintiffs for a possible class action suit against AT&T regarding its standalone online TV streaming service, DirecTV Now.

The Law Offices of Howard G. Smith, in an April 2 press release, said AT&T in June 2018 issued nearly 1.2 million new shares of common stock following its $85 billion acquisition of Time Warner – which led to the formation of WarnerMedia.

At issue is AT&T’s registration statement accompanying the stock issuance that claimed DirecTV Now subscriber growth would offset ongoing subscriber declines at legacy pay-TV services DirecTV satellite service and AT&T U-verse.

Instead, after AT&T raised DirecTV Now’s monthly pricing from the promotional $39.99 fee to $49.99, subscriber growth reversed to sub losses – more than 250,000 DirecTV Now subs jettisoned in the most-recent fiscal period.

“On this news, shares of AT&T fell as low as $27.36 per share, a decline of nearly 16% from the $32.52 price per share on the exchange date for the acquisition, thereby injuring investors,” Howard G. Smith wrote in the release.

In a media statement, AT&T denounced the action.

“This is a carbon copy of a baseless suit filed in February,” said the telecom. “In both cases, the claims are wholly without merit.”

 

 

 

WarnerMedia Creating Diversity/Inclusion Executive Position

WarnerMedia is set to create a new executive position focusing on diversity and inclusion issues. While no one has yet been hired to become the former Time Warner company’s first chief diversity and inclusion officer, the move was reportedly outlined in a March 20 staff memo from CEO John Stankey.

“During the Global Town Hall meeting [last September], I was asked about the lack of women and diversity on stage,” wrote Stankey. “I understand how important this is. In order for WarnerMedia to be the best company we can be, we have to include diverse voices at every level of our business. And while we already have some of the most talented women and diverse executives in the industry, we have more work to do.”

The chief diversity and inclusion officer will report directly to Stankey.

John Stankey

The new executive position follows restructuring among WarnerMedia, that has seen bosses at Warner Bros., HBO and Turner depart — including the former’s CEO Kevin Tsujihara exit March 18 following a story in The Hollywood Reporter about his affair with actress Charlotte Kirk.

Warner Bros. is now headed by an interim management team consisting of Toby Emmerich, Warner Bros. Motion Picture Group chairman, Peter Roth, Warner Bros. Television Group president and CCO; and CFO Kim Williams.

“There is no silver bullet to get us to where we need to be, but the leaders across our company are committed to working together to make the changes necessary as we build on our foundation towards greater progress,” Stankey wrote. “I believe that our new structure will enable us to do even more to achieve these objectives.”

 

 

DOJ Antitrust Boss: ‘You Learn More From Losing’

Following legal rebuke at the lower federal court and subsequent appeals court level regarding efforts to block AT&T’s $84 billion acquisition of Time Warner, the Department of Justice’s Makan Delrahim, head of the agency’s antitrust unit, said more was learned in defeat than in winning the litigation.

Speaking March 20 at the American Communications Association’s confab in Washington, D.C., Delrahim said legal challenges to future corporate vertical mergers — such as Sprint’s pending merger with T-Mobile — were empowered following the AT&T/Time Warner challenge.

“There are many lessons to be learned from the U.S. v. AT&T,” Delrahim said, according to a recording released by the ACA and reported by Deadline.com. “Given the standard of review that we were facing, [the outcome] wasn’t a surprise. You learn more from losing than from winning.”

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Specifically, the executive contends future legal challenges by the DOJ will be based more on structural changes rather than behavior.

Delrahim said the government’s approval of Comcast’s $30 billion acquisition of NBC Universal in 2009 revolved around behavior/consent remedies the cable giant was beholden to follow for a number of years — including silent partnership in Hulu.

Similar regulatory approach to AT&T/Time Warner wouldn’t have been worth the compromise, according to Delrahim.

“The AT&T offer will expire in less than seven years,” he said. “The new market structure [i.e. WarnerMedia] created by the transaction will remain indefinitely. If there’s harm that the arbitration offer is necessary to solve, then there’s likely to be harm in the future that will remain after the arbitration offer expires.”

Delrahim said the silver lining from the appeals court ruling was that some vertical mergers can be harmful to consumers — provided the government proves its case.

“The [appeals court] corrected many of the District Court’s misstatements and articulated a standard that is valuable,” he said.