AT&T Eyes AVOD on HBO Max to Widen ‘Available’ Customer Base

In addition to streaming Warner Bros. Pictures first-run movies, HBO Max’s major initiative in 2021 revolves around rolling out an ad-supported component to the platform’s SVOD legacy.

Speaking Jan. 5 on the virtual Citi Global TMT Conference, retiring CFO John Stephens (at the end of March) said AVOD enables WarnerMedia to expand its “available customer” footprint in the same way broadband and data plans have helped grow the cellular business.

“That’s what AVOD is going to help us do: expand the opportunity to serve customers in a different way,” he said.

As ad-supported VOD platforms proliferate in response to SVOD market domination by Netflix, Disney+, Hulu and Amazon Prime Video, the distribution channel, which includes The Roku Channel, IMDb TV, Pluto TV, Shout! Factory TV and Tubi, has been dogged by a dearth of higher profile content.

NBCUniversal’s Peacock streaming service, which launched in July as the market’s first hybrid SVOD/AVOD business model, is looking to change that. The ad-supported VOD option is targeting original content, including live sports such as the U.K.’s Premier League soccer to entice viewers.

AT&T CEO John Stankey told an investor even last year that live sports is an appealing component to OTT video in Europe.

“You’ll probably see as we move through AVOD, maybe we do some additional live work that we have coming forward,” he said.

Stephens said he fully expects AVOD to impact Max SVOD sub growth both positively and negatively, while at the same time luring non-SVOD consumers to the pay model.

“I see [AVOD] as an opportunity to serve additional customers, and from a finance perspective, amortize the investment in content over a greater customer base,” he said.

AT&T CFO Defends Warner Bros. Pictures Streaming Movies Concurrently With Theatrical Release

WarnerMedia’s decision to release Warner Bros. Pictures’ entire slate through 2021 — beginning with Wonder Woman 1984 on Christmas Day 2020 — concurrently with streaming access on HBO Max was one of the biggest entertainment stories of 2020. It was also controversial and a shot across the bow to how Hollywood has traditionally distributed major motion pictures.

Speaking Jan. 5 on the virtual Citi Global TMT Conference, retiring AT&T CFO John Stephens said the move, triggered by the ongoing pandemic and shuttered movie theaters, underscored Hollywood’s ongoing migration to distribute content direct to consumers while keeping a foot in the exhibition business.

AT&T CFO John Stephens

“We’re trying to utilize what is really a difficult situation,” Stephens said about the dual release strategy, adding that the studio found itself with a slate of movies “ready for utilization” in an uncertain healthcare environment.

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While declining to offer specifics surrounding the WW84 release, Stephens said management is pleased with what’s going on with HBO Max engagement and with customers.

“We’re utilizing these pieces of content in the best way we can,” he said. “We’re ahead of our [combined HBO, HBO Max sub growth] for the full year at the end of the third quarter [ended Sept. 30].” Stephens said that making theatrical titles available on Max has grown AT&T’s broadband business.

“We are seeing a movement to upgrading to our elite unlimited [data] plan, our highest-tired unlimited plan … and as such we’re seeing those positively impact revenue,” he said.

Indeed, WarnerMedia ended Q3 with more than 38 million combined HBO and HBO Max subscribers. That tally is expected to reach upwards of 50 million by the end of 2021, according to a majority of conference survey respondents.

When asked if the decision to release major movies into the streaming channel had impacted Warner’s ability to attract top talent and creators, Stephens said the studio has a near 100-year record working relationship with talent across the board.

“This is a unique situation” Stephens said. “We can’t change that, that is just the reality. So we’re just working to keep this system moving healthily forward and to utilizing the great content that is already there.”

AT&T Sells Crunchyroll to Sony’s Funimation

AT&T has agreed to sell its Crunchyroll anime streaming service to Funimation Global Group for $1.175 billion.

Funimation is a joint venture between Sony Pictures Entertainment and Sony Music Entertainment’s (Japan) subsidiary, Aniplex Inc.

Crunchyroll is an anime direct-to-consumer service within AT&T’s WarnerMedia segment with more than 3 million SVOD subscribers. It serves 90 million registered users across more than 200 countries and territories offering AVOD, mobile games, manga, events merchandise and distribution.

The combination of Crunchyroll and Funimation provides the opportunity to broaden distribution for their content partners and expand fan-centric offerings for consumers, according to the AT&T-Sony joint release.

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“The Crunchyroll team has done an extraordinary job of not only growing the Crunchyroll brand but also building a passionate community of anime fans. Crunchyroll’s success is a direct result of the company’s culture and commitment to their fans,” Tony Goncalves, chief revenue officer of WarnerMedia, said in a statement. “By combining with Funimation, they will continue to nurture a global community and bring more anime to more people. I’m incredibly proud of the Crunchyroll team and what they have been able to accomplish in the digital media space in such a short period of time. They’ve created an end-to-end global ecosystem for this incredible art form.”

“We are proud to bring Crunchyroll into the Sony family,” Tony Vinciquerra, chairman and CEO of Sony Pictures Entertainment, said in a statement. “Through Funimation and our terrific partners at Aniplex and Sony Music Entertainment Japan, we have a deep understanding of this global artform and are well-positioned to deliver outstanding content to audiences around the world. Together with Crunchyroll, we will create the best possible experience for fans and greater opportunity for creators, producers and publishers in Japan and elsewhere. Funimation has been doing this for over 25 years and we look forward to continuing to leverage the power of creativity and technology to succeed in this rapidly growing segment of entertainment.”

“We are excited to embark on this new journey. Crunchyroll has built a world-class brand with a passionate fan-base of over 3 million subscribers, 50 million social followers and 90 million registered users. These amazing fans have helped to propel anime into a global phenomenon,” Joanne Waage, GM of Crunchyroll, said in a statement. “Combining the strength of the Crunchyroll brand and the expertise of our global team with Funimation is an exciting prospect and a win for the incredible art form of anime.”

The transaction is subject to customary closing conditions, including regulatory approvals.

Redbox Owner in Talks to Buy AT&T’s DirecTV Business

Apollo Global Management, the investment group that acquired Redbox in 2016 for $1.6 billion, reportedly is in the running to acquire AT&T’s satellite operator DirecTV.

Apollo, along with Churchill Capital Corp. IV, have submitted separate bids around $15 billion for control of the El Segundo, Calif.-based DirecTV, which AT&T acquired in 2015 for $66 billion, including debt, according to The Wall Street Journal. AT&T would still be majority owner while relinquishing operational control of the pay-TV unit. A decision is expected early next year.

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The telecom is attempting to reduce its triple-digit billion-dollar debt load after acquiring Time Warner for $85 billion in 2018, which led to the creation of WarnerMedia.

DirecTV, like most pay-TV distributors, is losing video subscribers to less-expensive over-the-top video platforms such as Netflix, Disney+, Hulu and Amazon Prime Video. AT&T is staking much of its future on streaming video through the launch of HBO Max and separately as a major distributor of high-speed Internet.

Speaking Dec. 8 on a virtual investor event, AT&T CEO John Stankey said that he is pleased with the company’s progress in managing costs and corporate structure and overhead and will continue these efforts. He said a focus on corporate efficiency has resulted in lower distribution costs even as volumes continue to improve and that the coronavirus pandemic has further accelerated a move to digital customer engagement that was already underway. Stankey reiterated that AT&T continues to take a deliberate and thorough approach to monetizing non-core strategic assets such as DirecTV.

“We still have opportunities to do some things around rejiggering our portfolio,” Stankey said. “We’ll continue to force ourselves to look at those hard decisions.”

 

AT&T CEO Defends Warner Bros./HBO Max Movie Release Strategy, Says User Engagement Up 36% in Past 30 Days

AT&T CEO John Stankey Dec. 8 defended WarnerMedia’s landmark decision to release all 2021 Warner Bros. movies in theaters concurrently with subscription streaming video service HBO Max in the home. Speaking at the UBS Global TMT Virtual Investor confab, Stankey said the move was done in response to the “psyche of the population” during the ongoing pandemic that has decimated the theatrical business through mandated closures, limited seating at operating screens and wary moviegoers.

“We’re all participants in a market that serves customers,” Stankey said. “The longer-term impacts are going to be dictated by what consumers wish to do.”

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Contending the streaming video horse has “left the barn,” Stankey said response among existing HBO subscribers to Max continues to resonate. He said adoption is now 12.6 million subs, up from 8.6 million at the end of the most-recent fiscal period. Since launching HBO Max on May 27, AT&T has made the $15 monthly SVOD service free to its 42 million combined HBO pay-TV (and HBO Now) subs in the United States. Adoption of HBO Max has been slow, with fewer than 3 million HBO pay-TV subs signing up through June — a reality driven by confusing access rules and unavailability on the Roku platform.

By comparison, rival streaming service Disney+ generated almost 74 million subs globally in its first year.

Stankey said offering Warner’s theatrical slate in the home adds an incentive to subscribe to HBO Max while affording diehard moviegoers equal access.

“Customers have a tremendous amount of choice as to how they choose to engage with content,” Stankey said. “If we just simply sit here and say, ‘This is about whether or not people go to movie theaters,’ I think we’re missing the broader point. Today, even before WarnerMedia made this decision, customers could go watch great, two-hour content on a variety of competitive services. Customers are going to drive what happens in a market, ultimately.”

The executive said the distribution strategy could change should the new coronavirus vaccine pan out and consumers return to theaters.

“We’re not putting one [distribution channel] over the other,” Stankey said. “This to me seems like a very friendly and innovative approach.”

WarnerMedia Boss Jason Kilar Sends Out Staff Memo Announcing Job Cuts

WarnerMedia CEO Jason Kilar Nov. 10 sent out a staff email outlining the company’s ongoing restructuring, which the former Hulu CEO said included addressing “which jobs are being eliminated and which roles have changed.”

The memo did not identify specific positions or personnel. A town hall meeting is scheduled for Nov. 11 at 2 p.m. ET/11 a.m. PT at which Kilar said he will answer staff questions.

Since acquiring Time Warner and creating WarnerMedia, AT&T has grappled with paying down billions in debt and streamlining costs magnified during a pandemic.

Kilar, who was hired by corporate parent AT&T on April 1 to spearhead the former Time Warner company, which includes Warner Bros., HBO and Turner, has previously disclosed that upwards of 20% of WarnerMedia’s staff positions would be let go. In August, Kilar cut about 500 positions, including that of longtime home entertainment boss Ron Sanders, as part of restructuring the company’s entertainment studios, elevating HBO Max companywide, and consolidating commercial activities.

“This is a very painful email to write,” Kilar wrote. “And for a number of you reading this, I realize it will be even more painful to receive. For this, I am sorry.”

“Today, we have arrived at a number of difficult decisions that are resulting in a smaller WarnerMedia team,” Kilar wrote. “This is a function of removing layers and the impact of consolidating previously separate organizations. Starting today in North America, we will be sharing which jobs are being eliminated and which roles have changed. We are continuing to review proposed changes in other countries across our non-U.S. businesses, the timing of which will vary according to local regulatory requirements. Nothing about this is easy. But please know, these reductions are not in any way a reflection of the quality of the team members impacted, nor their work. It is simply a function of the changes I believe we must make in order to best serve customers. For those impacted, we will be offering severance and healthcare packages, in addition to professional services and team member assistance programs.”

Kilar said he anticipates that organizationally, things will “settle down materially” in the weeks and months to come, while adding that WarnerMedia’s future is not static.

“Our future is about inventing ever better ways to move the world through story, which entails embracing change,” he wrote. “I have every confidence in this world class team to do just that.”

To our colleagues who are leaving, I wish there were words to lessen today’s pain. Your contributions are a permanent part of this great company and today’s news does not change that. I am extremely thankful for all that you have done for this team and this mission. I hope that at some point you will look back on all of it with immense pride.

Sony Eyeing AT&T’s Crunchyroll Anime SVOD Service in $957 Million Deal

Sony Corp. is reportedly finalizing a $957 million acquisition of AT&T’s Crunchyroll anime subscription streaming VOD service and IP content. AT&T is looking to sell non-core assets since it acquired Time Warner, including Warner Bros., HBO and Turner, accumulating more than $180 billion in debt in the process.

The deal’s status was first reported by Nikkei Asian Review, which cited sources familiar with the situation. AT&T, which gained Crunchyroll in its 2018 acquisition of Otter Media from The Chernin Group, had been asking $1.5 billion for the anime platform.

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Sony, which acquired Funimation and its one million subs in 2017, is looking to solidify control of the anime market. The Crunchyroll deal would bring in-house streaming, 1,000 anime titles, and an existing subscriber base of 70 million free ad-supported viewers and three million paid users globally.

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 company’s 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 the previous 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 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 things,” 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 to offer 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 plans 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 and GM of 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 of 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.”