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.”

 

Ex-HBO Boss Inks 5-Year Apple TV+ Production Deal

In a move to jumpstart its branded subscription streaming video service, Apple has reportedly signed a five-year production deal with Richard Plepler, former CEO of HBO.

Under the deal ironed out by Zack Van Amburg and Jamie Erlicht, Apple’s joint heads of video, Plepler’s company, Eden Productions, will create original series, movies and documentaries for Apple TV+. The $4.99 service launched Nov. 2, 2019, with fewer than a dozen original programs.

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“I’m excited to work with Zack, Jamie and the standout team at Apple who have been deeply supportive of my vision for Eden from day one,” Plepler said in a statement. “The shows that Zack and Jamie produced, ‘The Crown’ and ‘Breaking Bad,’ are among those I most admired. Apple is one of the most creative companies in the world, and the perfect home for my new production company and next chapter.”

Plepler, who helped launched subscription streaming video platform HBO Now in 2015, ran HBO for 28 years — a career that saw the premium channel produce myriad high-profile shows, including “The Wire,” “The Sopranos,” “True Detective,” “Game of Thrones,” “Silicon Valley,” “Oz,” “Sharp Objects,” “Westworld,” “Boardwalk Empire,” “Big Love,” “The Larry Sanders Show,” “Sex and the City,” “Veep,” “Last Week Tonight With John Oliver,” “Chernobyl,” “Band of Brothers,” “Barry” and “Curb Your Enthusiasm,” among others.

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Plepler stepped down from his position shortly after AT&T closed its acquisition of Time Warner, creating WarnerMedia, headed by John Stankey.

Stankey: HBO Max Will Have Broader Appeal

While the Disney+ streaming video service is marketed toward families, with scant ‘R’-rated content, HBO Max is eyeing a wider family dynamic including young and “old” adults.

Speaking Dec. 10 at the UBS Global TMT Conference in New York City, WarnerMedia CEO John Stankey said HBO Max would expand its programming portfolio from adult-only edgy content to include fare for younger audiences.

“Most of your young kids in households are not thinking about the next HBO show they’re going to watch — God help us,” Stankey said.

WarnerMedia CEO John Stankey

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The executive, who was filling in for under-the-weather AT&T CEO Randall Stephenson, agreed that Disney’s appeal to children is undeniable and hard to match. He said attempts by Disney+ to appeal to a wider family segment remains a challenge — not withstanding the success of “The Mandalorian” “Star Wars” spin-off series.

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“There’s some stuff that’s interesting to adults in the offer and there’s some stuff that’s probably interesting your 20-something and 30-something-year-old members of the family, but it’s not that deep in that regard,” Stankey said.

HBO Max, which launches in May priced at $15 monthly, has hired a small army of executives with a mandate to greenlight content across a wide spectrum of genres, including comedy and animation.

Rather than putting Max on a solitary pedestal, Stankey says Disney+, Netflix and Max offer niche programming target audiences, indicating the three services could represent an ideal OTT bundle.

“You’d be hard-pressed to suggest that Disney+ is a replacement service for Netflix. Or you’d be hard-pressed to say it’s a replacement service for Max,” he said. “They’re addressing different segments.

“Max is a product that appeals to the entire family and the family wireless plan. And it’s something that everybody in the family looks at and says that has something in it for me. The parent is the decision maker at the macro end of the family plan, says, that has something for me, I see myself in that offering.”

 

HBO Max to Include Live Streaming — in the Future

Heading into WarnerMedia Day on Oct. 29 for the official unveiling of pending subscription streaming video product HBO Max, AT&T CEO Randell Stephenson said the service over time would deliver live-stream television.

Reiterating that HBO Max, which launches in early 2020, would not replicate Netflix, Stephenson said the platform would instead offer live TV similar to online services such as Sling TV.

“So you want an SVOD service, HBO Max is great. Over time, we look forward to bringing in a live element as well,” he said.

Stephenson said the company hopes to soon focus on a traditional satellite TV business, which he contends will be there “for a long time,” and the HBO Max platform.

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Streamlining video is part of management’s goal over the next three years to aggressively reduce the  massive debt load (more than $160 billion) following (i.e. costly) acquisitions of DirecTV ($67 billion) and Time Warner ($108 billion) — both including debt.

Speaking on the Oct. 28 fiscal call, CFO John Stephens said WarnerMedia CEO John Stankey has been tasked with generating 200 basis points (2%) of margin expansion in video going forward. To do that, the company is narrowing its focus on HBO Max and AT&T TV Now (formerly DirecTV Now) in an effort to mine 1% to 2% out of cost-of-equity (COE) per year, according to Stephens. COE is the return a company requires to decide if an investment meets capital return requirements.

“If we can mine that out of our COE every year, that’s $1.5 billion to $2 billion [in savings],” he said.