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.

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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.”

 

Post Kevin Tsujihara, WarnerMedia Releases First Diversity Report

WarnerMedia Sept. 26 released its first-ever annual report looking at diversity, inclusion and belonging across both its corporate operations and the films, television series and digital content created by its various production businesses.

In September 2018, WarnerMedia announced a “production diversity policy,” which included the commitment to report on its diversity and inclusion efforts annually.

The policy was partially in response to the fallout following the resignation of former Warner Bros. CEO Kevin Tsujihara, who left the studio after revelations of an extramarital affair with an aspiring actress.

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Earlier this year, WarnerMedia hired its first chief enterprise inclusion officer, Christy Haubegger, saying her leadership would be key to expanding and developing initiatives designed to make the company and its content more diverse and inclusive.

The report, covering 2018, highlighted three areas at WarnerMedia: workforce (including workforce composition, employee resource groups), content (including scripted TV, films, news, animation) and community (including industry and local outreach partnerships and programs).

Among the key findings related to workforce and production staffing:

WarnerMedia’s global workforce is 54% male and 46% female, and its U.S. workforce is 53% male and 47% female.

Globally, half of all new hires and promotions to VP and above were women.

About 42% of non-managers were people of color, but representation decreased at more senior levels. However, the percentage of people of color who were hired or promoted in 2018 exceeded their total percentage across all levels.

“This will lead to increased representation going forward,” read the report.

Across WarnerMedia’s non-film scripted programming, females represented 34% of onscreen roles and 23% of behind-the-camera positions.

Across WarnerMedia’s non-film scripted programming, people of color represented 24% of onscreen roles and 23% of behind-the-camera positions.

“[At] WarnerMedia companies, we have a longstanding commitment to diversity and inclusion, and consider these values an important part of our culture and a business priority,” John Stankey, COO of AT&T and CEO, WarnerMedia, said in a statement.

“While I’m incredibly proud of what this report shows and our ongoing dedication to transparency, I recognize that we’ve got more work to do at every level. We know diversity, inclusion and belonging are important to our employees, our creative partners, our customers and to our success.”

Indeed, the report underscored various examples of diversity and inclusion in action, including spotlights on various employee resource groups (Black Professionals@Turner, HBO Proud, Women of Warner UK and others), employee-centric content and platforms showcasing D&I activities across the enterprise (Warner Bros.’ “We See You,” Turner’s “Hello, My Name Is…” and “HBO POV”) and a behind-the-scenes look at the company’s films, TV shows and animated series.

While the report only tracked gender and race, WarnerMedia said it is developing new processes, tools and formats for gathering more detailed information about the diversity of its workforce and productions, allowing it to better tailor its efforts and outreach.

Going forward, the annual report will look at data from the previous full calendar year, and will evolve to reflect the changes taking place across WarnerMedia’s businesses.

Stankey: AT&T Keeping DirecTV, Integral to HBO Max Launch

John Stankey, CEO of WarnerMedia and COO of parent AT&T, Sept. 24 sought to dispel media reports the telecom is looking to jettison satellite operator DirecTV to appease an activist investor and reduce debt.

In an interview with The Wall Street Journal, Stankey said DirecTV would “be important” as WarnerMedia rolls out new subscription streaming video service, HBO Max, early next year.

Specifically, the executive said subscriber data from DirecTV would help WarnerMedia target the appropriate users for HBO Max.

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

The Journal previously reported that AT&T CEO Randall Stephenson was considering spinning off DirecTV, which has lost more than 1 million pay-TV subs as consumers continue to embrace over-the-top video and alternative forms of home entertainment.

Indeed, AT&T has 3 million fewer pay-TV subs since acquiring DirecTV in 2015.

Stankey suggested DirecTV has suffered by not being able to bundle high-speed Internet to consumers as competitor Comcast does.

“Where we’ve built better broadband, the business is performing just fine,” he said.

Stankey also said that Stephenson met with investor Elliott Management Co., which holds more than $3.2 billion worth of AT&T stock, to seek a compromise regarding sought management changes — including replacing the CEO and COO.

Stankey told The Journal there are no plans to replace his position at WarnerMedia or the CEO’s of AT&T.

“I’m not looking to find my successor right at the moment,” he said.

Th executive also alluded to HBO Max being offered at premium price compared to Netflix’s $12.99, Apple TV+ ($4.99) and Disney+($6.99).

With the current HBO Now priced at $15 monthly, HBO Max, which will offer original and catalog programming, will be the most expensive SVOD on the market.

“Higher quality should warrant a slightly higher price,” Stankey said.

 

AT&T CEO Defends Media Strategy, Including John Stankey as Possible Successor

Facing a boycott of sorts from an activist investor calling for senior management changes at AT&T, CEO Randall Stephenson Sept. 17 sought to outline to Wall Street why the telecom under its current management is on the right path in a rapidly changing media landscape.

Speaking Sept. 17 at Goldman Sachs 28th Annual Communacopia confab in New York, Stephenson said his decision to spend hundreds of billions of dollars acquiring satellite operator DirecTV and Time Warner was based in part on an evolving in a digital ecosystem.

“If you had asked me that question five years ago, I’d be hard-pressed to say it makes sense, in the old world,” he said. “In the new world, it makes all the sense in the world. We believe people are going to spend more and more of their day watching premium content.”

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Stephenson said AT&T has more than 170 million “customer relationships” requiring more bandwidth and connectivity to consume content, which is why he spearheaded the telecom’s $85 billion acquisition of Time Warner two years ago and the $67 billion purchase of DirecTV in 2015.

AT&T also operates 5,500 retail stores nationwide.

But it was those acquisitions, which have ballooned AT&T’s debt exponentially, while at the same time DirecTV and AT&T U-verse continue hemorrhaging subscribers (1 million this year) that led investor Elliott Management, who owns a $3.2 billion stake in AT&T, to write a letter to the board seeking changes.

Specifically, Elliott CEO Paul Singer wants Stephenson and COO John Stankey, who is also CEO of WarnerMedia, replaced.

Stephenson, who says the board will “evaluate [the letter] and see what makes sense for our shareholders,” says the content creation business is changing dramatically — moving from a linear TV distribution business model to over-the-top video.

The executive says WarnerMedia is uniquely qualified to meet the challenge with both himself and Stankey in their current positions.

“It’s a hard play to take a legacy company on legacy distribution models and make a pivot into digital distribution,” Stephenson said. “[Stankey] has done a really nice good job breaking down the [intra-company] silos. He’s got experiences that are long, wide and deep.”

“[WarnerMedia] is one of the largest-scaled TV and film production studios in the world,” he said, adding that AT&T has now become the largest distributor of HBO in the world, including 66% bigger than the premium channel’s No. 2 distributor.

Stephenson said acquiring Time Warner was due to the fact the media distribution world was changing and not growing on legacy pay-TV platforms, but rather digital platforms.

“We’ve had to reorient the business,” he 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.

Activist Investor Seeks Ouster of AT&T CEO Randall Stephenson, COO John Stankey

With AT&T spending more than $163 billion acquiring DirecTV and Time Warner (now WarnerMedia), the telecom remains challenged paying down debt and orchestrating a clear strategy for the combined assets in an age of cord-cutting.

That appears to be the gist why activist investor Paul Singer’s Elliott Management sent a 24-page letter to the AT&T board seeking executive changes, according to industry tip sheet “Byers Market”.

Paul Singer

In the letter, Singer contends AT&T’s shareholder returns have underperformed the S&P 500 by well over 100 percentage points over the past 10 years.

He said the share-price underperformance has occurred as AT&T’s M&A strategy has taken it into multiple new markets over a series of deals totaling nearly $200 billion, and as its operational performance has measurably declined.

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As a result, AT&T, according to Singer, is “deeply undervalued,” trading at just over half the multiple of the S&P 500 — by far its biggest discount yet.

Singer, who owns a $3.2 billion stake in AT&T, is known for taking stakes in publicly held companies and firing off letters to the board in hopes of exacting executive change — which often occurs.

About AT&T, Singer reportedly seeks the removal of CEO Randall Stephenson and COO John Stankey (who is also CEO of WarnerMedia) regarding the former’s merger & acquisition strategies.

Specifically, Singer contrasts AT&T’s M&A strategy with former Time Warner CEO Jeff Bewkes.

“When Bewkes took over Time Warner as CEO, he inherited a sprawling company with numerous related but non-core assets — AOL, Time Warner Cable, a collection of publishing assets and other smaller businesses,” read the letter. “He then spent the following decade divesting the non-core assets in order to focus on Time Warner’s leading content franchises.
This strategy paid off: Time Warner became both a flourishing media enterprise and a strong investment, returning more than double the S&P 500’s ~140% return during Bewkes’ 10-year tenure.”

Singer called on the board to evaluate (i.e. sell off) assets such as DirecTV, AT&T’s Mexico operations and U.S. wireline (pay-tv) platform (U-verse) platforms, among others.

In a response, AT&T’s board said it would review the letter, adding the company has already implemented many of the changes outlined by Singer.

The letter comes following the surprise retirement of John Donovan, CEO of AT&T Communications, and the Sept. 3 promotion of Stankey to COO.

Singer, in the letter, said he remains “cautious on the benefits of the [Time Warner, DirecTV] combination.”

Indeed, AT&T’s rollout of standalone online TV service, DirecTV Now, has seen the platform jettison hundreds of thousands of subscribers after it began ending the service’s initial $34.99 monthly fee. The service has been rebranded to AT&T TV.

The telecom has big plans for the launch of HBO Max, a SVOD platform intended to compete with Netflix, Amazon Prime Video, Disney+ and Apple TV+, among others.

At the same time, Max would appear to signal the end for HBO Now, the four-year-old SVOD service with less than 6 million subscribers.

WarnerMedia CEO John Stankey Promoted to AT&T COO

In a major personnel move, AT&T Sept. 3 announced that John Stankey has been appointed president and chief operating officer of AT&T, effective Oct. 1, a new position reporting to Randall Stephenson, AT&T chairman and CEO.

Stankey will continue serving as CEO of WarnerMedia, the4 corporate umbrella operating Warner Bros., HBO and Turner.

The company also promoted Jeff McElfresh to CEO of AT&T Communications, effective Oct. 1, replacing John Donovan, who earlier announced his retirement.

McElfresh will lead AT&T’s largest business unit, AT&T Communications, reporting to Stankey in his new role will be, in addition to his current WarnerMedia executive team; and Brian Lesser, CEO of Xandr.

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“Now is the time to more tightly align our collection of world-class content, scaled consumer relationships, technical know-how and innovative advertising technology,” Stephenson said in a statement. “It’s the natural next step in bringing together the distinct and complimentary capabilities of AT&T Communications, WarnerMedia and Xandr to deliver for consumers the benefits of a modern media company.

Stankey, 56, joined AT&T in 1985 and has served in a variety of leadership roles, including: corporate strategy and M&A; media and entertainment; operations, IT and technology; consumer mobility, broadband and TV; and enterprise business.

McElfresh, 48, has nearly 25 years of experience with AT&T in a variety of strategic, operational and technology leadership roles. Before being named to lead AT&T Communications, McElfresh was president of AT&T Communications’ Technology and Operations group where he was responsible for the company’s network, technology, cybersecurity, data and labs operations.

WarnerMedia Readying $16-$17 SVOD Service Focused on HBO, Cinemax, Warner Bros. Movies

WarnerMedia reportedly plans to launch a subscription streaming video service later this year revolving around HBO, Cinemax and Warner Bros. movies — and priced from $16 to $17 monthly.

The unnamed service, which will bow in beta later this year, would join similar SVOD efforts from Disney ($6.99 Disney+) and Apple aimed at competing against Netflix, Amazon Prime Video and Hulu, according to The Wall Street Journal, which cited sources familiar with the situation.

NBC Universal is readying an ad-supported VOD service for Xfinity subscribers in 2020, which would be available separately to consumers for a monthly fee.

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Notably, WarnerMedia’s service would cost slightly more than what HBO Now ($14.99) and Cinemax ($12.99) do now separately — the latter charged to pay-TV subscribers.

WarnerMedia, which formed following AT&T’s $85 billion acquisition of Time Warner, is also eyeing ad-supported VOD service.

The rush to over-the-top distribution comes as AT&T continues to hemorrhage pay-TV subscribers among its DirecTV and AT&T U-verse platforms. Standalone online TV service, DirecTV Now, for the first time lost subscribers in the most-recent fiscal period as well.

Indeed, AT&T is scrambling to find an OTT product that resonates with consumers. Late last month, it inked a joint venture deal with The Chernin Group aimed at investing $500 million into both ad-supported and subscription-based online video businesses.

“Combining our expertise in network infrastructure, mobile, broadband and video with The Chernin Group’s management and expertise in content, distribution, and monetization models in online video creates the opportunity for us to develop a compelling offering in the OTT space,” John Stankey, CEO of WarnerMedia, said in a statement.

WarnerMedia Absorbs AT&T’s Otter Media

WarnerMedia May 31 announced that Otter Media is being realigned under the WarnerMedia Entertainment group run by Bob Greenblatt, chairman of WarnerMedia Entertainment and direct-to-consumer business.

Otter Media was formed in 2014 by AT&T and The Chernin Group. Its properties include Fullscreen, a social media platform serving creators and brands; anime brand Crunchyroll; SVOD platform VRV; Rooster Teeth, a media and entertainment company serving the gaming community with a footprint of more than 40 million subscribers to its YouTube network, over 5 million monthly visitors to RoosterTeeth.com, and 2.5 million registered community members; a majority stake in Gunpowder & Sky, a digital- first studio; and minority stakes in Hello Sunshine, a cross- platform brand and content company for women founded with Reese Witherspoon, and Mars Reel, a media and lifestyle brand focused on telling authentic stories of top high school athletes through premium video content.

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The combination brings together WarnerMedia’s digital businesses of the company at a time when the organization’s new direct-to-consumer platform is being built with access to content from HBO, the WarnerMedia cable networks, Warner Bros., plus a robust slate of new original content.

Otter Media CEO Tony Goncalves

Tony Goncalves, CEO of Otter Media, will now also lead the development of the new WarnerMedia direct-to-consumer service, along with Otter’s existing brands and services.

He reports to Greenblatt. Andy Forssell, most recently COO of Otter Media and former CEO of Hulu, will move to the role of EVP and GM of the new streaming service reporting to Goncalves. Kevin Reilly, president, TBS/TNT/TruTV and CCO of direct-to-consumer, will remain in that position reporting to Greenblatt.

Brad Bentley, who was serving as the streaming service’s GM, informed the company that he would be leaving.

“As we continue to build out our new streaming business and realign WarnerMedia functions, this step will facilitate further scale and focus in our efforts to offer customers an engaging and compelling product experience,” John Stankey, CEO, WarnerMedia, said in a statement.

Goncalves joined Otter Media, as CEO last year. Through AT&T’s acquisition of DirecTV, he served as CEO of digital brands and head of strategy and business development for AT&T where he helped the company navigate the rapid pace of change in a digital centric world.

Forssell currently serves as EVP and COO of Otter Media, as well as president of Fullscreen. He joined Otter from Fullscreen where he served as COO for several years, overseeing the company’s day-to-day operations, as well as leading technology and product development. Forssell has served in a number of CEO, COO and general management roles, at companies like Hulu and ShowYou, helping to define and evolve the world of streaming video from its infancy.

 

 

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.