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.”

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.”

Stankey: Movie Industry ‘Better Served’ With Alternative Distribution Options

With major theatrical exhibitors pushing back re-opening screens to consumers due to surges in coronavirus infections in parts of the country, WarnerMedia continues to re-evaluate how it will distribute its slate of new-release movies.

Speaking on the July 23 AT&T fiscal call, CEO John Stankey said he welcomed alternate distribution channels afforded studios and consumers during the pandemic. The successor to CEO Randall Stephenson was asked if Warner Bros. would delve further into releasing movies direct to consumers in their homes — beyond the May 15 offering of animated Scooby-Doo movie Scoob!

Stankey said he would be surprised if “coming out of COVID” the movie industry didn’t see “some adjustment” how new titles are distributed beyond the traditional 90-day theatrical window.

While stressing that theaters continue to play an important role in the distribution of studio movies, including titles such as director Christopher Nolan’s espionage thriller Tenet, which Stankey contends is meant to be seen on the big screen rather than in the living room, the executive said ongoing uncertainty on the market’s return to normal forces a reboot of traditional distribution.

“I don’t know when theaters are going to re-open,” Stankey said. “There’s no question the longer this [shutdown] goes on, there’s going to be some content on the margin [that we look at and] say, ‘it may be better served’ to be distributed in another construct. I love the fact we have that option now.”

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Stankey said premium VOD and subscription streaming video platform HBO Max afford studios distribution options for previously earmarked theatrical releases. Will Wonder Woman 1984 head to PVOD? Stankey doesn’t think so.

The sequel to the 2017 hit Wonder Woman, the new franchise installment from director Patty Jenkins, was supposed to open on June 5, was later moved to Aug. 14, and is now slated for October in the United States.

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“I would be very surprised if that was the case,” he said. “We’re going to take a piece at a time. It’s nice to have the [D2C] reality.”

Without naming titles, Stankey reiterated Warner’s current box office slate has been “retooled” for direct-to-consumer distribution.

“Yes, there are going to be some shifts as we move forward here,” he said.

Stankey: HBO Max, AT&T TV Now Merger Possible

With WarnerMedia staking much of its future on over-the-top video and digital distribution, the May 27 launch of subscription streaming platform HBO Max could eventually spearhead a unified OTT product offering with digital TV service AT&T TV Now, a senior executive told a virtual investor event.

Speaking May 13 remotely on the JP Morgan Technology, Media and Communications confab, John Stankey, who is set to replace AT&T CEO Randall Stephenson in July, said the two software-based platforms would ideally become linked in the future. The move mirrors WarnerMedia melding existing HBO Now and HBO Go subscribers into Max.

“You want a platform that can distribute both [services],” Stankey said. “So AT&T being software driven, HBO Max being software driven, user interface capabilities, bundling, price start to move together. I think we’re at a very natural place to see that begin to occur and our TV business and our SVOD business start to become one as we get out over the next couple of years.”

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Indeed, distribution is key to Max (and AT&T TV Now) surviving in the crowding OTT universe. The latter has already gone through two name changes from DirecTV Now, which saw initial consumer interest plummet following pricing changes.

Max is launching without an assist from Amazon Fire TV. Recent data contends Roku has 51% of the streaming media device market in the U.S., and about 30% of the streaming stick market. By comparison, Fire TV has less than 30% of the U.S. streaming device market, but 57% of the streaming stick market.

It also remains unclear whether the $14.99 Max will be offered on Amazon Channels — the e-commerce behemoth’s shrewd platform offering third-party SVOD service to more than 100 million Prime members. Notably, Amazon Channels was credited with driving subscriber growth to HBO Now following its 2015 launch. But in exchange for the landing on Channels, Amazon reportedly extracts significant compensation from services, in addition to keeping user data.

Regardless, myriad services such Starz OTT, BritBox, Acorn TV, Showtime OTT, CBSN and Epix market themselves on Channels.

AT&T CEO Randall Stephenson Stepping Down; John Stankey Taking Over

In a surprise, AT&T April 24 announced Randall Stephenson is stepping down from his CEO position on June 1, to be replaced by COO John Stankey, former CEO of WarnerMedia Entertainment.

After serving 13 years as chairman and CEO, Stephenson, 60, will serve as executive chairman of the board of directors until January 2021 to ensure a smooth leadership transition.

Stephenson’s career saw the telecom acquire satellite operator DirecTV and then spend even bigger ($85 billion) purchasing Time Warner, including Warner Bros., HBO and Turner. The acquisitions ballooned AT&T’s debt and caused headaches such as the failed DirecTV Now online TV platform (now called AT&T TV), and allegations of inappropriate sexual conduct against former Warner Bros. CEO Kevin Tsujihara.

In addition, consumers are increasingly moving away from traditional linear pay-TV — a reality underscored by AT&T losing almost 900,000 pay-TV subscribers through March 31. With the coronavirus pandemic shuttering Hollywood production, free cash flow may be rising, but WarnerMedia’s markets are shrinking — most notably at the box office.

Stankey’s comments regarding a probable sluggish theatrical market after restrictions are lifted prompted Warner Bros. CEO Ann Sarnoff to respond by telling the media the studio still supported exhibitors and the traditional 90-day box office window.

President Trump didn’t wait to tweet his opinion, calling Stephenson’s departure “great news!” in reference to WarnerMedia’s ownership of CNN, which the president often clashes with.

“Randall Stephenson, the CEO of heavily indebted AT&T, which owns and presides over Fake News @CNN, is leaving, or was forced out. Anyone who lets a garbage ‘network’ do and say the things that CNN does, should leave ASAP. Hopefully replacement will be much better!” Trump wrote.

Stankey’s selection as AT&T’s next CEO completes the final phase of a succession planning process that AT&T’s board began in 2017, which included a thorough evaluation of internal and external candidates.

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The telecom said it engaged in an extensive five-month search process to ensure that the company’s next CEO possessed the “vision, experience, talent and leadership” qualities necessary to deliver on AT&T’s strategic plans.

“Leadership succession is one of the Board’s most important responsibilities,” AT&T director Beth Mooney said in a statement. “After an extensive evaluation, it was clear that John Stankey was the right person to lead AT&T into the future.”

Stankey, 57, has served as president and COO since October 2019. He joined AT&T in 1985 and has more than 30 years of accomplished leadership spanning nearly every area of AT&T’s business, from corporate strategy and technology, to operations and media and entertainment.

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Stankey has served in a variety of roles, including: CEO of WarnerMedia; CEO of AT&T Entertainment Group; Chief Strategy Officer; Chief Technology Officer; CEO of AT&T Operations; and CEO of AT&T Business Solutions.

“I’m honored to be elected the next CEO of AT&T,” Stankey said in a statement. “My thanks go to Randall for his vision and outstanding leadership during a period of tremendous change and investment in the core capabilities needed to position AT&T well for the years ahead.”

Later this year, AT&T’s board will elect an independent director when Stephenson retires as executive chairman in January 2021.

WarnerMedia Clarifies Theatrical Commitment

After AT&T COO John Stankey said he doubted movie theaters could rebound quickly under the shadow of the coronavirus, subsidiary WarnerMedia Entertainment went into damage control clarifying the executive’s comments during the telecom’s April 22 fiscal call.

WarnerMedia properties include Warner Bros., HBO and Turner.

Stankey said the virus and resulting theater closures would change consumer behaviors and expectations regarding how they access filmed entertainment.

“We’re evaluating our product distribution strategy, re-looking at volumes and the required support levels we need in a down economy,” he said. “We’re rethinking our theatrical model and looking for ways to accelerate efforts that are consistent with the rapid changes in consumer behavior from the pandemic.”

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Re-thinking the theatrical model is often alarmist code for doing away with the traditional 90-day exclusive box office window and expediting retail channel distribution, including home entertainment.

Indeed, Warner is rushing animated release Scoob! to retail channels on May 15 — its original theatrical release date.

“Now our focus is on defining and leveraging the new normal across all of our operations,” Stankey said.

Those comments prompted Ann Sarnoff, CEO of Warner Bros., to reiterate to the media the studio’s support for traditional theatrical releases, including holding back tentpole movies such as Tenet and Wonder Woman 1984 for future box office distribution.

“We remain supportive of the theatrical experience and our exhibition partners, and are confident that our tentpole titles … are exactly the type of films that will have people eager to return to theaters,” Sarnoff told The Hollywood Reporter.

AT&T’s John Stankey Doesn’t Expect Movie Theaters to ‘Snap Back’

With Georgia becoming the first state to publicly announce it would allow movie theaters to re-open on April 27, theater chains such as AMC, Regal and Cinemark remain optimistic business can return to some degree of normalcy by July. AT&T COO John Stankey isn’t so sure.

Speaking April 22 on the telecom’s somber fiscal call, Stankey said WarnerMedia is “rethinking the theatrical model,” adding a return to normal for exhibitors won’t “snap back,” and instead could take extended time as consumers slowly regain confidence that sitting in a cineplex isn’t hazardous to their health.

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“I think that’s going to be something that we’re going to have to watch the formation of consumer confidence, not just about going to movies, just in general about being back out in public and understanding what’s occurring there,” Stankey said.

Will Smith as Venus and Serena Williams’ father, Richard, in biopic ‘King Richard’

Indeed, Warner Bros. has pushed back release of its highest-profile summer tentpole — Wonder Woman 1984 — to August. Other titles have been delayed to 2021 while animated feature Scoob! is headed to premium VOD on May 15.

King Richard, the Venus and Serena Williams’ biopic starring Will Smith as their father, has been delayed to November 2021. The Many Saints of Newark, a “Sopranos” prequel movie, has also been delayed to next year.

Among other superhero movies, The Batman has been moved to Oct. 1; The Flash has been moved up to June 2, 2022, from July 1; and Shazam! 2 has been pushed back to Nov. 4, 2022, from April 1.

“The theater business is an incredibly stressed business [right now] … it’s hard to generate revenue,” Stankey said.

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AT&T Keeping DirecTV Cards Close to Vest

Dish Network’s Charlie Ergen may think it’s “inevitable” about a satellite TV merger with AT&T’s DirecTV, but AT&T COO John Stankey is keeping his cards close to the vest.

Speaking March 3 at the Morgan Stanley Technology, Media & Telecom Conference in San Francisco, Stankey appeared open to industry consolidation while underscoring the strength of satellite TV’s rural customers.

Characterizing any merger as “a little problematic” due to regulatory issues, Stankey reiterated that the $48.5 billion acquisition of El Segundo, Calif.-based DirecTV in 2015 was always about securing video customers for future distribution technology, i.e. over-the-top video and high=speed Internet.

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“We will continue to offer satellite and DirecTV where it has a rightful place in the market, places where cable broadband is not prevalent, oftentimes, more rural or less dense suburban areas,” Stankey said. “We’ll continue to offer it for customers on a stand-alone basis, who find its superior content offering to be something that they wish to have.”

AT&T’s WarnerMedia Entertainment is about to launch subscription service HBO Max in May, while just-released AT&T TV (formerly DirecTV Now) bowed March 2.

“We’re really pleased with what we saw [with AT&T TV] … that we would be able to replicate how customers were receiving the product in the other markets that we would enter where we own facilities and are able to pair video with broadband,” Stankey said.

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Regardless, at the time of the 2015 acquisition, AT&T U-verse and DirecTV had a combined 26 million customers in the United States and more than 19 million customers in Latin America, including Mexico and the Caribbean.

Flash-forward to the end of 2019 and AT&T had 19.5 million domestic pay-TV subscribers, with another 13.3 million in Latin America. That’s a decline of 25% and 30%, respectively.

Wall Street analyst Craig Moffett contends regulatory issues shouldn’t be a problem for DirecTV and Dish as they were in 2002 when the Justice Department sued to block a deal, saying the merger would stifle competition and hurt consumers.

“Satellite TV was growing by leaps and bounds at the time. Now it is in free fall. That alone may be enough to settle the debate; sure, two would be better than one, but both are credible bankruptcy risks on their own. Heck, they’d be a credible bankruptcy risk even together,” Moffett wrote in Sept. 30, 2019 note.

He contends a merger argument could best be presented to regulators as an act of preserving pay-TV for rural Americans without access to high-speed Internet.

“[That] would be a reasonably persuasive one,” Moffet wrote.

 

Charlie Ergen: Dish Network, DirecTV Merger ‘Probably Inevitable’

With Dish Network and DirecTV losing nearly 4 million combined linear TV subscribers in 2019, it seems just a matter of time before the two satellite TV operators combine operations.

That’s the sentiment coming from Dish CEO Charlie Ergen who is aggressively transitioning his company into a wireless telecommunications provider featuring a nationwide 5G network.

Speaking on the Feb. 19 fiscal call, Ergen said is “probably inevitable” Dish and DirecTV would merge due to ongoing consumer migration away from linear television.

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“Growth in TV is not coming from linear satellite TV providers,” Ergen said.

Indeed, it’s not. DirecTV and AT&T U-verse lost 945,000 subs in the fourth quarter, while Dish lost 194,000, which was an improvement from 338,000 subs lost in the fourth quarter 2018.

Ergen said industry growth is being driven by “huge programmers and trillion-dollar companies” putting immense resources into streaming video. The executive contends over-the-top video has become so pervasive that regulatory issues regarding a possible merger between Dish and DirecTV would be minimal.

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“Obviously there still could be regulatory issues there. And we’ll have to see how that all develops, but [a merger] to me seems, and maybe each company only has two subscribers when you put them together, but eventually those two are probably going to, that’s going to make some sense,” Ergen said. “Because you can’t swim upstream against a real tide of big OTT players.”

While AT&T has 3 million fewer pay-TV subs since acquiring DirecTV in 2015, COO John Stankey contends the pay-TV operator — via high-speed Internet service — is integral to the successful launch of HBO Max.

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

“Where we’ve built better broadband, the [pay-TV] business is performing just fine,” he said late last year.

 

AT&T Outlines How It Will Jumpstart HBO Max Subscriptions

In the rush to validate expensive forays into proprietary over-the-top video distribution, media/tech giants such as Disney and Apple have partnered with third-party vendors and/or leaned on subsidiaries to boost subscriber retention.

HBO is no different.

During AT&T’s Jan. 29 fiscal call, WarnerMedia CEO John Stankey, who is also president and COO of the telecom parent, disclosed details how company plans to support the May debut of HBO Max — the SVOD platform company executives contend is better than the competition, including Netflix.

Indeed, AT&T said it bypassed $1.2 billion in fourth-quarter ($2.8 billion in annual) revenue forgoing third-party licensing of Warner Bros. Television properties “Friends” and “The Big Bang Theory,” among other shows, in advance of the Max launch.

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AT&T is going to give Max free to existing HBO subs through DirecTV and AT&T U-verse — or about 10 million consumers. The number is significant, since that’s the tally Disney said it generated in the first 24 hours after launching Disney+, assisted in part by a promotion with Verizon affording the telecom’s data subs with a free year of service.

Apple, which reportedly already has more than 33 million Apple TV+ subs, is giving a free year of service with any new purchase of an iPhone, iPad, Mac or Apple Watch.

Meanwhile, the eight million HBO Now subs (currently paying the identical $14.99 Max fee) will be automatically eligible for a Max upgrade without cost provided they do not access the OTT service through third-party platforms such as Roku, Apple TV, Amazon Channels, Google Chromecast or Hulu, among other devices.

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AT&T will also incentivize its “highest ARPU” wireless subscribers with promotional Max offerings, in addition to foot traffic at any of the telecom’s 5,500 branded retail locations in the U.S.

“It’s a great opportunity to improve our overall churn [subscriber retention], which we’ve seen happen from giving HBO to current unlimited [wireless] customers,” Stankey said.

“With Max, we’ll offer consumers more than twice the amount of programming for the same price as HBO today,” he added.

Stankey said going forward HBO’s 34 million domestic linear subscribers should expect to see more generalized entertainment content, including unscripted reality shows, news and sports.

“It’s an important dance and choreography [with linear TV distributors] that we have to do to get right,” he said. “And we feel we’re positioned very well to make that happen.”