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.”

CFO: AT&T TV Streaming Service Focusing on ‘Long-Term Value’ Customers

When AT&T launched online TV platform DirecTV Now in 2016, it offered subscribers access to 60 channels of content for a $34.99 monthly fee. Consumer response was strong with more than 2.5 million people signing up for the promotional pricing, which included a free Apple TV device.

Additional programming price points ranged from $50 to $70 monthly, with a cloud-based DVR in the works. For AT&T, the loss-leader price point aimed at competing against Dish Network’s Sling TV, PlayStation Vue, Hulu with Live TV and YouTube TV, among others. It expected the service to generate 20 million subscribers.

Instead, as the telecom initiated price hikes, subscribers dropped the service — in droves. In the third quarter alone last year, DirecTV Now lost more than 190,000 subscribers. Since 2016, AT&T has lost more than 5 million pay-TV subs.

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The telecom attributed the sub losses to “higher prices and less promotional activity,” meaning that consumers had balked at ongoing price increases and a refusal to extend discounts.

“We’re in the early innings,” COO John Stankey said at the time.

Fast-forward to the Deutsche Bank 2020 Media, Internet and Telecom Conference on March 10 in Palm Beach, Fla., where AT&T CFO John Stephens said it was too early to comment on the recent launch of the rebranded AT&T TV (formerly AT&T TV Now and DirecTV Now before that).

John Stephens

AT&T TV ranges from $59.99 to $79.99 monthly and are only guaranteed for 12 months, with the initial plan increasing to $93 monthly after a year.

Stephens said the telecom spent most of 2019 transitioning through about 2.5 million unprofitable online TV subs who balked at paying prices commensurate with pay-TV.

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“We had a lot of customers that decided that they weren’t going to stay with us,” he said. “The linear TV industry is going through transition. And we’ll continue to see that ourselves.”

The executive believes AT&T TV will “very cost efficiently” add new profitable customers, including people who also subscribe to AT&T broadband or fiber distribution “because it’s so easy to use.”

“We are expecting that by the end of the year, you’ll see improvements in our trends that … will look like the rest of the industry,” Stephens said.

AT&T CFO Backs John Stankey, Downplays Apple TV+ Impact on HBO Max

The day after Apple announced pricing/content updates for its Apple TV+ subscription streaming service, and an activist investor called for the ouster of AT&T’s CEO and COO, the telecom’s CFO John Stephens came out swinging.

Speaking Sept. 11 at the Bank of America Merrill Lynch Media, Communications & Entertainment Brokers Conference in Los Angeles, Stephens didn’t directly address Elliott Management’s Paul Singer (who owns $3.5 billion of AT&T stock) or his letter to the board calling for executive changes, including replacing CEO Randall Stephenson and COO John Stankey — the latter also CEO of WarnerMedia.

AT&T CFO John Stephens

Specifically, Singer questions the cost/benefits involved acquiring DirecTV and Time Warner as the pay-TV market shrinks in a rapidly evolving over-the-top video ecosystem.

Indeed, AT&T expects to lose more than 1.3 million pay-TV subscribers in the current third quarter (ending Sept. 30).

Stephens, however, outlined why Stankey is the right executive to oversee Warner Bros., HBO and Turner operations, in addition to AT&T.

Stephens said AT&T’s goal to meld entertainment content with wireless direct to the consumer requires specialized leadership befitting Stankey’s skills.

AT&T COO/WarnerMedia CEO John Stankey

“John has IT and technology experience,” Stephens said. “He had network experience. He was at our business, a wireline group and the wholesale side. He has run consumer mobility. He’s had experience in strategy. He’s had experience, with Warner Media and real knowledge of it.

“So, he’s the guy that’s got the background, that capabilities and we know and knows us and he knows all our capabilities.”

Stephens said Stankey understands the AT&T culture (he’s been with the company almost 20 years).

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“He has the ability to move things and how to get things done,” he said. “It makes all the sense … and is the right way to go about moving forward, particularly with our real significant move with HBO Max.”

Indeed, AT&T in October is planning an extensive unveiling of HBO Max — yet another direct-to-consumer subscription service centered around the HBO brand.

With Apple pricing Apple TV+ at $5 monthly, the pending service costs a third of the current HBO Now SVOD service.

Stephens isn’t concerned, characterizing the nine original shows launching on Apple TV+ as

“We only have a 40-year head start with [HBO] … a quality product that is the premium of premium,” he said. “[The] depth of just HBO alone is tremendous and it’s much different than what was talked about by some of the other [SVOD] carriers.

“When you add to that the Warner Bros. library — some of the children stuff there, what it might be — new shows that might come out and other things, it reinforces, boy, we’ve got really quality assets and really quality capabilities that others just don’t have at their disposal. So, we feel really good about that.”

Stephens pointed out that a couple of the Apple TV+ original programs (“Mythic Quest,” “Little Voice”) are produced by Warner Bros. Television.

“So, I’m sure those are pretty good shows because the folks over at Warner Bros. do great work,” he said.

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 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.”

 

 

WarnerMedia CEO: ‘My Job is Not to Build Another Netflix’

On the heels of AT&T’s odd corporate decision announcing — in an Oct. 10 regulatory filing by the CFO — the future (Q4 2019) launch of a subscription video-on-demand service, WarnerMedia subsidiary CEO John Stankey rushed out a follow-up statement with few additional details.

Stankey, who was in Los Angeles attending a media conference, said the unnamed and unpriced service would help WarnerMedia expand its reach by offering consumers a new distribution choice for HBO, Warner Bros. and Turner’s collection of films, television series, libraries, documentaries.

“We expect to create such a compelling product that it will help distributors increase consumer penetration of their current packages and help us successfully reach more customers,” Stankey said in the statement.

Speaking at the Vanity Fair New Establishment Summit, Stankey said the OTT video service would be different from existing products on the market.

“My job isn’t to build another Netflix,” he said.

As expected, the executive – who made news earlier this year when he challenged HBO to up its game – said the OTT venture would be spearheaded by HBO with Turner (CNN, TNT, TBS) and Warner Bros. content bundled in.

“Our job is to build a compelling offer of content that gets a large number of customers,” Stankey said.

That apparently includes creating original content for AT&T businesses that include DirecTV Now and pending AT&T Watch.

“We’ll do both within our business,” Stankey said.