AT&T CEO: ‘Tenet’ Theatrical Release No Fiscal ‘Home Run’

Warner Bros.’ return to theatrical distribution remains a work in progress due to the ongoing coronavirus pandemic keeping theaters in key markets closed.

Speaking on the Oct. 22 fiscal call, AT&T CEO John Stankey said he’s “breathing a lot easier now” about the restart of movie and TV productions at Warner, which he said totaled about 130 through last week from the pre-pandemic tally of 180 in February.

“We’re well back up [into production],” Stankey said, adding that he didn’t think production needed to return to the previous 180 count based on renewed “rationalizations” regarding market realities.

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“The confidence of employees [working on sets] is growing day by day, so feel good about where that’s at,” he said. “Think we’re out of the woods from the dead cold of the pandemic. That’s going to help our products, most importantly HBO Max.”

The theatrical business, however, is a different reality.

“That’s still one of the things we don’t have great visibility on,” Stankey said.

Prodded by director Christopher Nolan’s penchant for theatrical releases, Warner on Sept. 4 launched espionage thriller Tenet in theaters worldwide. While ticket sales were respectable overseas, domestic revenue was not, generating just $50.6 million, or about 15% of the movie’s $334 million global take. The movie reportedly had a $200 million production budget.

“I can’t tell you that we walked away from the Tenet experience saying it was a home run,” Stankey said. “[But] I’m happy we did it.”

The CEO said the studio has had “some experimentation” on distribution, which included forays into early transactional VOD and premium VOD access in the home — the latter around animated movie Scoob!.

“We tried a few thing,” Stankey said, without elaborating. “We learned things we can do. I believe if theaters were open nationwide, [if] California and New York were open, we would have some latitude to be able to do some of these geographical releases.”

He said the winter holiday period would be the next “checkpoint” as to whether Warner could move content back into theaters, which Stankey said remains the most ideal distribution channel for major tentpole titles.

“At the same time, we’re expecting this be incredible choppy moving into next year,” he said. “We’re not optimistic…expecting a big recovery in theatrical movement in the early part of next year.”

Stankey expects the theatrical waters to remain “choppy” well into 2021, which he said translates into evaluating all “of our [distribution] options,” including studio teams working the Plan A, Plan B and Plan C plans.

“As we get through the next month or two, we’ll pull the cards on the [plans],” he said.

AT&T CFO John Stephens estimates COVID-19 has had a $1.6 billion negative impact on WarnerMedia, the organizational umbrella that includes Warner Bros., HBO and Turner.

WarnerMedia, HBO Max Taking a Road Trip

AT&T, WarnerMedia and General Motors have partnered offering drivers of select Chevrolet, Buick, GMC and Cadillac vehicles access to high-speed Internet and video entertainment while on the go.

Dubbed “WarnerMedia Ride,” the platform offers video content on personal smartphones or tablets connected to in-car Wi-Fi hotspots. That includes news and sports programming and content from brands including Bleacher Report, Boomerang, Cartoon Network, CNN, TBS, TNT and more. AT&T aplans to offer HBO Max on qualifying data plans next year.

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“The addition of WarnerMedia’s library of podcasts, movies and television programming – combined with AT&T’s wireless connectivity – is just another way we’re enhancing the ownership experience for our customers, whether that’s a family looking to entertain kids or a commuter enjoying a favorite podcast,” Santiago Chamorro, VP, GM global connected services, said in a statement.

GM customers already have access to WarnerMedia Audio, including more than 70 podcasts and hundreds of hours of audio content from WarnerMedia’s vast podcast library and live audio simulcasts from the WarnerMedia news networks.

“WarnerMedia Ride” will be available with AT&T unlimited data plans in connected cars at no additional cost across U.S domestic car brands. Passengers can download the “WarnerMedia Ride” app on the App Store or Google Play.  A user-friendly interface with a new authentication feature lets users access content once the app senses the vehicle’s Wi-Fi hotspot.

“This relationship with GM means we can fully connect car owners with new immersive experiences and exclusive content to create meaningful connections for the whole family,” said Barry Loudis, VP, WarnerMedia content experiences.

AT&T plans to offer HBO Max as a unique premium bundle of connectivity and content for AT&T connected car data plan subscribers next year. This would mean 10,000 hours of curated premium content from iconic brands such as HBO Max, Warner Bros., Cartoon Network, Looney Tunes and more through in-vehicle Wi-Fi.

Owners of Chevrolet, Buick, GMC or Cadillac vehicles can go to my.gm.com to get more information and find out if their vehicle is eligible for WarnerMedia content.

CEO: AT&T Turning the Page on Pay-TV; Embracing Streaming Video, Broadband

AT&T, like Comcast Cable, has been hemorrhaging pay-TV subscribers in recent years. The corporate owner of DirecTV and AT&T U-verse lost about 4 million combined subscribers in 2019, which included former online TV service DirecTV Now as consumers increasingly cut the cord in search of cheaper over-the-top video alternatives.

In response, subsidiary WarnerMedia rolled out subscription streaming platform HBO Max on May 27, with a planned ad-supported VOD option set for 2021. Speaking from the corporate office Sept. 15 during the Goldman Sachs 29th Annual Communicopia Conference, CEO John Stankey said the linear pay-TV business afforded the telecom upwards of 28% household share, which he said doesn’t work in today’s connectivity/entertainment ecosystem.

John Stankey

Stankey said rollout of HBO Max and requisite high-speed Internet business could result in AT&T having upwards of 70% household share going forward.

“We really need products and services that maybe have different characterization within the home,” Stankey said. “Hopefully a little bit lower price point that can be in more households and I think that’s why HBO Max is so attractive.”

The executive said he couldn’t be more pleased with the Max rollout despite scuttlebutt the service has underperformed with consumers and existing HBO subscribers indifferent to switching platforms. Stankey said comparing Max with Netflix or Disney+ is counterproductive, adding that Disney had a very different “set of plays to run” than WarnerMedia and AT&T had available.

“We’ve done incredibly well … growing the combination of HBO and HBO Max customers,” Stankey said. “HBO had been stagnat[ing] at a [certain] customer count. The only time it went up a little bit was when a new season of ‘Game of Thrones’ would come out, and then it would kind of work back down the backside.”

The CEO said hours of engagement among Max subs is higher than for HBO pay-TV subs, without elaborating on the number of actual Max members.

“And that’s a good thing for the future, because the more times a week, the more times a day that a customer wants to go and touch an [Max, AT&T] application, the more relevant you’re going to be over time,” Stankey said.

He said Warner Bros. remains in the “middle innings” of a “nine-inning game” understanding the COVID-19 impact on theatrical distribution. Stankey said the studio would continue experimenting with all avenues of distribution, including premium VOD, transactional VOD and theatrical going forward.

Indeed, Warner Bros. again delayed the sequel Wonder Woman 1984 until Christmas Day, from Oct. 2, the previous date to which it was delayed.

“We’ve got a few more to play out,” he said. “And I don’t think we’ll know exactly how it plays out until we’re ‘back to normal,’ where people are moving around in society without fear of risk and that means the concentration of the number of people getting into a building.”

AT&T Continues to Hold Open the Theatrical Window

AT&T CFO John Stephens was one of many U.S. moviegoers who donned a mask and watched Christopher Nolan’s Tenet at the movie theater over the Labor Day weekend. The movie has generated about $150 million at the global box office despite continued theater shutdowns in key markets such as California and New York.

Speaking Sept. 9 on the virtual Bank of America Media, Communications and Entertainment confab, Stephens reiterated WarnerMedia’s ongoing support for the theatrical window — a stance undermined in recent months by the Walt Disney Co.’s decision to embrace premium video-on-demand for the live-action Mulan remake and Universal Pictures’ decision to entertain PVOD and theatrical releases for all new major studio films.

John Stephens

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Stephens said a movie on the scale of Tenet plays best on a large screen rather than in a consumer home. Indeed, more than 50% of the movie’s $20.1 million Labor Day weekend domestic box office occurred at Imax screens, the biggest of the big screens.

“I couldn’t have imagined being able to see [Tenet] and enjoy it in the same way here in my home,” Stephens said. “We understand the distribution model is going to evolve … so we’re going to continue to look at [PVOD], but in no way do I want to imply that we’re not going to continue to work with those theater owners.”

Tenet is on track to equal last year’s It: Chapter Two, which generated $211.5 million at the domestic box office for Warner to finish 2019 in the No. 10 spot, just behind the studio’s Oscar-winning Joker with $333.7 million.

AT&T Ups Effort to Sell DirecTV, Xandr and Crunchyroll

After years of acquisitions, AT&T is on a sales mode. The telecom’s on-again, off-again love affair with satellite pay-TV distribution appears to be off again. The company has reportedly hired a major investment banker to help unload DirecTV, which it acquired in 2015 for $48.5 billion just as online TV and subscription streaming video-on-demand was flourishing.

AT&T is also looking to offload anime-based streaming service/publisher Crunchyroll and Xandr, the online advertising unit launched just two years (following the $1.8 billion acquisition of AppNexus), but has struggled to gain traction due to a variety of issues in the rapidly changing digital ecosystem.

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With nearly $180 billion in debt following the $85 billion purchase of Time Warner (now WarnerMedia), AT&T has been looking to cut non-core assets. The debt is now down to $152 billion, and despite repeated denials from senior executives over the years, DirecTV appears to be on sales block.

The Wall Street Journal reports AT&T is working with Goldman Sachs to find a buyer willing to pay around $20 billion for 50% stake in the El Segundo, Calif.-based pay-TV operator. The sale is challenged by ongoing secular changes in home entertainment underscored by the loss of 7 million combined DirecTV/AT&T U-verse video subs in the past year.

As subscription streaming video-on-demand services such as Netflix, Amazon Prime Video and Hulu proliferate, AT&T has attempted to straddle traditional linear TV distribution with over-the-top video. The company has now moved much of its content distribution future into HBO Max, the $15 monthly SVOD platform, which plans to offer an ad-supported tier in 2021.

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“To the extent that we’re able to get those [pay-TV] customers engaged with us on those [streaming] platforms, then we’re in a good place, and we’re OK with that,” CEO John Stankey told CNBC in July. “And if that takes us down a path that says satellite delivery is less important, so be it.”

A possible merger with rival Dish Network is a favorite proposition for Dish founder/CEO Charlie Ergen, but some observers say the idea would trigger anti-trust issues from the government.

Xandr, which generated about $2 billion in revenue in 2019, had hoped to capitalize on the burgeoning digital ad market focusing on non-video displays. That strategy has apparently backfired as online video ads dominate and online TV publishers were reluctant to sell their ad inventory through Xandr due to AT&T’s competing HBO Max platform, The Journal reported, citing sources familiar with the situation.

Crunchyroll, which AT&T acquired in its purchase of Otter Media, is on the block for a reported $1.5 billion with interested suitors including Sony Corp.

AT&T CFO: WarnerMedia Staff Cuts Not Due to HBO Max Launch

WarnerMedia downsizing 600 positions on Aug. 10, which included the departure of longtime Warner Bros. Home Entertainment executive Ron Sanders, was not done in response to the launch of subscription streaming video-on-demand platform HBO Max, according to AT&T CFO John Stephens.

Speaking Aug. 11 at the virtual Oppenheimer Technology, Internet & Communications confab, Stephens said the job cuts — spearheaded by new WarnerMedia boss Jason Kilar — were done to refocus the company and eliminate redundancy.

AT&T CFO John Stephens

“All of these [business] groups are then focused and speak with one voice and, quite frankly, allow for some streamlining of support services, and back-office and G&A services,” Stephens said. “I view it as more of a refocusing of the company.”

Stephens said the cuts were not about a need to “adjust anything,” but rather to make WarnerMedia perform better going forward.

Sanders, who followed high-profile departures of Bob Greenblatt and Kevin Reilly on Aug. 7, was president of Warner Bros. worldwide theatrical distribution, and president of Warner Bros. Home Entertainment. With theatrical distribution at a standstill due to the ongoing coronavirus pandemic, coupled with WarnerMedia’s non-disclosure of home entertainment on its financial statements, current uncertainties in the studio business perhaps undermined Sanders’ job status.

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Indeed, the primary focus at WarnerMedia remains HBO Max, which launched May 27 with about 4 million subs into a crowded SVOD market spearheaded by Netflix, with Amazon Prime Video, Hulu and Disney+, among others, at the distance.

“The biggest thing, the most exciting thing for us [going forward] is HBO Max,” Stephens said.

Finally, Stephens said AT&T has downsized its $180 billion corporate debt level 15% to $153 billion through June 30. The telecom ballooned its debt following the $85 billion acquisition of Time Warner, which included Warner Bros., HBO and Turner.

CEO Stankey: ‘Still Have Work to Do’ Building HBO Max Subscriptions

One month after launching on May 27, WarnerMedia’s subscription streaming video platform, HBO Max, had 4.1 million subscribers who’d activated their Max app. By comparison, Disney+ had 10 million app activations after one day.

Disney’s foray into SVOD was greatly assisted by a strong brand and promotional campaign with Verizon, the latter affording the telecom’s 115 million wireless subs free 12-month access to Disney+. HBO Max has no similar jumpstarter.

While AT&T CEO John Stankey makes the usual upbeat comments (“It’s the early days”) and claims the average number of weekly hours spent viewing Max is 70% more than on HBO Now, which launched in 2015, the underlying message remains: Convincing consumers and existing HBO subs to join Max is a work in progress.

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“We still have work to do to educate and motivate the exclusively linear [HBO] subscriber base [about Max], and we’ll continue to work with our wholesale partners to drive these activation rates,” Stankey said.

AT&T ended the fiscal second quarter with 36.3 million combined HBO and HBO Max subscribers compared with 34.6 million at the end of 2019.

The CEO said there’s been “positive pull-through” combining Max with AT&T wireless and fiber plans, and expects that ongoing 5G handset upgrades will be one of the key drivers growing wireless service revenue in the second half of the year.

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Yet, while AT&T has worked overtime making Max available to consumers through nearly every content distributor in the U.S., it has failed to get assistance from Roku and Amazon Fire TV — which represent about 70% of all standalone streaming media devices in the U.S., according to Parks Associates.

Indeed, rival SVOD services Netflix, Amazon Prime Video and Hulu all have distribution on Roku and Fire TV. Negotiations between WarnerMedia, Roku and Amazon have reportedly stalled over control of user data, among other issues.

“We’ve tried repeatedly to make Max available to all customers using Amazon Fire devices, including those customers that have purchased HBO Now via Amazon [Channels],” Stankey said. “Unfortunately, Amazon has taken an approach of treating Max and its customers differently on how they’ve chosen to treat other [SVOD] services.”

AT&T Posts 886,000 Q2 Video/OTT Sub Loss; Broadband Declines Too

AT&T says the bulk of its pay-TV subscriber woes is behind it. The numbers tell a different story. The media giant July 23 said it lost 886,000 video subs in the second quarter (ended June 30), which is a slight improvement from the 897,000 subs lost in the first quarter.

The decline included 68,000 AT&T TV Now online TV subs, about half of the 138,000 subs lost in Q1. The online TV segment ended the quarter with 720,000 subs — down from 1.3 million during the previous-year period. AT&T ended Q2 with 18.4 million video connections compared to 22.9 million on June 30, 2019.

Incoming CEO John Stankey continues to paint a rosy future, saying the company’s “resilient cash” from operations continues to support investments in growth areas, dividend payments and debt retirement.

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“We are aggressively working opportunities to sharpen our focus, transform our operations and continue investing in growth areas, with the customer at the center of everything we do,” Stankey said in a statement.

Regardless, as pay-TV operators continue to lose video subs to alternative channels, including over-the-top video and SVOD, they have rebounded through the growth in high-speed Internet — a prerequisite to broadband video access.

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Yet, the telecom said it lost 79,000 broadband subscribers to end the period with about 13.9 million connections. That compared with 14.4 million subs on June 30, 2019. Broadband net losses included 159,000 disconnections where nonpaying subscribers are receiving service under the “Keep Americans Connected Pledge” AT&T rolled out during the ongoing coronavirus pandemic.

AT&T said Entertainment Group revenue (which includes pay-TV units DirecTV and AT&T U-verse and OTT) dropped 11.4% to $10.1 billion, reflecting continuing declines in video subs, legacy services and lower advertising revenue, which were impacted by lower spend attributable to COVID-19.

Revenue declines were partially offset by higher pay-TV and OTT video ARPUs. Entertainment operating expenses totaled $9 billion, down 8.3% versus the second quarter of 2019, largely driven by lower content costs resulting from fewer subscribers, lower marketing costs and ongoing cost initiatives, partially offset by annual content rate increases, higher amortization of fulfillment cost deferrals, including the impacts of second quarter 2020 updates to decrease the expected subscriber lives and pandemic-related bonus payments to front-line employees and contractors.

AT&T Drops ‘Watch TV’ Sign-Ups

AT&T has begun informing users that it will no longer offer its low-budget AT&T Watch TV service to new and returning subscribers.

“Standalone WatchTV is no longer available for new sign ups or to re-subscribe,” AT&T said in a statement. “Existing WatchTV customers who subscribe to the app or have a qualifying AT&T Unlimited plan can continue to use the service. Customers on a qualifying AT&T Unlimited plan with the WatchTV benefit can create a separate account.”

Launched in 2018 during AT&T’s contentious regulatory battle with the DOJ over its $85 billion acquisition of Time Warner, and targeting the younger high school and college-age demo using mobile devices, AT&T Watch TV is a $15 a month streaming service featuring select channels and no DVR.

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With the rebranding of DirecTV Now to $39.99 AT&T TV in March, the telecom-turned-media-giant is streamlining its streaming portfolio. AT&T TV also includes access to new subscription streaming video service, and company flagship, HBO Max.

Indeed, the telecom continues to struggle pitching standalone online TV (and linear pay-TV) to consumers. AT&T jettisoned 897,000 combined DirecTV and U-verse subs in the first quarter (ended March 31), in addition to 138,000 AT&T TV members. The one million+ sub loss was up 65.1% from the 627,000 subs lost in the previous-year period.

AT&T CFO: HBO Now Viewership Up 40% During Pandemic

AT&T’s singular streaming video focus is on the recent subscription video-on-demand launch of HBO Max. Yet, the telecom’s existing SVOD service, HBO Now, which launched in 2015, saw a 40% uptick in viewership during early days of the coronavirus pandemic, CFO John Stephens said June 17 during an investor event.

Speaking remotely at the Credit Suisse Virtual Conference, Stephens said consumer response to Max, which launched less than three weeks ago, remains promising, adding he expects AT&T to announce subscriber data on the earnings call in July.

AT&T CFO John Stephens

AT&T’s WarnerMedia segment, which operates HBO, recently announced that HBO Now would be called HBO going forward. This, despite the fact Now subs who access the platform through HBONow.com, Google or Apple TV automatically have access to Max at no extra charge. Now subs who access via Roku, Amazon Prime Channels or third-party ISP, however, must download the Max app and re-register.

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Separately, HBO Go, which offers HBO pay-TV subs on-demand access to programming, is being phased out with subs given the option to migrate to Max.

“Quite frankly, on the HBO Max side, we’ve been pleased with where we’re at,” Stephens said. “But it’s been three weeks or not quite three weeks. And so from that perspective, we’re — it’s early. We’re — well, I’m very about positive it, but it’s early.”

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The CFO’s measured support for Max underscores corporate’s sometimes confusing messaging surrounding HBO’s streaming assets. Stephens hinted that was one of the reasons AT&T hired former Hulu CEO Jason Kilar to run WarnerMedia, which includes Warner Bros., Hulu and Turner.

“[Kilar’s] very experienced in over-the-top products and launching, and … he’s very helpful to what was a very strong team already,” Stephens said. “We feel very good about that. And we’re optimistic. We just remain optimistic. It’s a multiyear process. But so far, so good.”

Stephens says AT&T is sticking to previous guidance projecting 50 million Max subs by 2025.

“We’re going to give it some more time and make sure we do full measure,” he said. “But yes, we saw increased [Max] engagement. The engagement really improved in HBO Now.”