Randall Stephenson’s Legacy: Backing Media in Partisan Era

Just hours after AT&T announced that its CEO Randall Stephenson would be stepping down in July after 13 years, President Donald Trump called 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 tweeted April 24 on social media.

Stephenson’s departure comes as AT&T grapples with shrinking pay-TV subscribers at DirecTV and AT&T U-verse, an online TV misfire with DirecTV Now (rebranded as AT&T TV), and $163 billion in debt — a figure that grew by $5.5 billion earlier this month following a third-party loan during the coronavirus pandemic.

Some have speculated the DOJ’s repeated attempts to nix AT&T’s $85 billion acquisition of Time Warner (and formation of WarnerMedia Entertainment) in 2016 stemmed from the president’s public animosity toward CNN.

“CNN’s job is not to be popular with the president,” Stephenson said at the time of the merger. “CNN’s job is really simple: It’s the job of all media: to hold people in power accountable.”

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Strong words from a CEO who often criticized government regulation, welcomed Trump’s corporate tax cut and was frequently accused of telling Wall Street that he preferred taking care of shareholders over consumers.

Indeed, in the first quarter (ended March 31), AT&T’s dividends paid for common shares totaling $3.7 billion (up 47% since 2017) and the company repurchased 142 million of its common shares for $4.7 billion.

Stephenson made headlines in 2017, when, as National Chair of the Boy Scouts of America, he criticized Trump’s address at the Boy Scouts of America’s annual Jamboree in West Virginia.

Trump had turned his speech into a partisan political rally, criticizing Obamacare, reiterating his 2016 election victory over Hillary Clinton, reportedly asking for greater loyalty from scouts and their parents and criticizing former President Barack Obama for not attending the Jamboree — a tradition among presidents since Franklin D. Roosevelt in 1937.

“Anyone knows his speeches get highly political — we anticipated that this could be the case,” Stephenson told The Associated Press. “Do I wish the president hadn’t gone there and hadn’t been political? Of course.”

Stephenson’s dogged defense of CNN continued despite some concern on Wall Street the global network founded by billionaire Ted Turner could undermine AT&T’s businesses going forward.

“This is one of those issues you just ask, ‘What is the right thing to do?'” Stephenson said at a Wall Street Journal forum as reported by The Dallas Morning News. “And then you do the right thing.”

Craig Moffett, analyst with MoffettNathanson, said Stephenson leaves behind a company that transformed from telecom operator to media conglomerate.

“But the jury is still out if the transformation is for better or worse,” Moffett told CNBC.

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.

AT&T: 890,000 Pay-TV/OTT Subs Lost in Q1; Drops Fiscal Guidance

AT&T had a problem with pay-TV subscriber retention before the pandemic. First-quarter fiscal results (ended March 31) suggest COVID-19 hasn’t spared the telecom, with management saying the virus cost upwards of 5 cents-per-share in pre-tax earnings, or about $360 million.

AT&T said it lost 897,000 pay-TV subscribers in the quarter, which include DirecTV and U-verse. It also lost 138,000 over-the-top video subs, which includes recently launched AT&T TV. The company ended the quarter with just 788,000 streaming video subs compared to 1.5 million a year ago. Pay-TV subs totaled 18.5 million compared with 23.4 million last year — a loss of 4.9 million subs over the past 12 months.

“It’s impossible to state the impact COVID-19 is having on all of us,” CEO Randall Stephenson said on the fiscal call. AT&T contends 60% of revenue and 70% of pre-tax earnings come from the company’s core communication business, including enterprise network, broadband and wireless.

“These businesses have proven to be resilient and they help provide a recurring stream of revenue and solid cash flows even in times of economic stress,” COO John Stankey said.

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“Without [COVID-19], the quarter was about what we expected — strong wireless numbers that covered the HBO Max investment, and produced stable [pre-tax] earnings and margins,” Stephenson said in a statement.

The executive said AT&T maintains a strong cash position and balance sheet, with core businesses continuing to generate free cash flow — even in today’s environment.

“In light of the pandemic’s economic impact, we’ve already adjusted our capital allocation plans and suspended all share retirements,” Stephenson said. “As a result, we’re able to continue investing in critical growth areas like 5G, broadband and HBO Max, while maintaining our dividend commitment and paying down debt.”

Regardless, CFO John Stephens said AT&T expects increased cord cutting among pay-TV subscribers, in addition to lower revenue from hospitality businesses such as hotels, bars and restaurants.

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AT&T Lost 3.4 Million Pay-TV Subs in 2019

The pay-TV subscriber drain is no longer a drip. It’s a bursting dam.

AT&T Jan. 29 announced it lost more than 3.4 million linear TV subscribers in 2019, including 945,000 subs in the fourth quarter, ended Dec . 31. That compared with sub losses of 1.2 million and 391,000, respectively, in the previous-year periods.

Pay-TV, which includes DirecTV and AT&T U-verse, ended the year with 19.4 million subs — down 15.3% from 22.9 million at the end of 2018.

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More disconcerting is that AT&T’s much publicized foray into over-the-top video distribution isn’t resonating with consumers. AT&T Now TV, the brand name replacement for DirecTV Now, shed 665,000 subs last year, up 52% from a loss of 436,000 subs in 2018.

The online TV drop-off abated somewhat in Q4 to 219,000 subs, an improvement from 267,000 subs lost in the previous-year period. AT&T ended the year with 926,000 TV Now subs, a 42% decline from 1.6 million subs at the end of 2018.

And unlike rival Comcast supplanting pay-TV subs with high-speed Internet, AT&T actually lost broadband subs in 2019. That included a 1% decline in broadband and 23% drop in DSL. The telecom ended the year with 14.1 million high-speed Internet subs compared to 14.4 million in 2018.

With AT&T’s WarnerMedia readying the launch of HBO Max and rebranded (again) AT&T TV, CEO Randall Stephenson remains upbeat.

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“We delivered what we promised in 2019 and we begin this year with strong momentum in wireless, with HBO Max set to launch in May and our share retirement plan well underway,” Stephenson said in a statement. “Our 2020 outlook positions us to deliver meaningful progress on our 3-year financial and capital allocation plans as we continue to invest in growth opportunities and create value for our owners, as we did last year.”

 

Warner Bros. Changes Iconic Studio Water Tower Logo for HBO Max Unveiling

In advance of the the Oct. 29 afternoon WarnerMedia Day unveiling further details on the HBO Max subscription streaming video platform, Warner Bros. has changed the logo on its iconic studio water tower.

“This is a big deal,” AT&T CEO Randall Stephenson told the media from the Warner lot for the Oct. 28 fiscal call. “You’re going to see the result of something that a lot of people said couldn’t be done when we did the Time Warner deal, and that is, breaking down the three silos within Time Warner.”

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AT&T acquired Time Warner for $85 billion, which when including the company’s debt, totaled more than $108 billion.

“Bringing these three companies together, we’re creating something really, really powerful together that could not have been done otherwise,” Stephenson said. “The idea that you can stand up a product, HBO Max, that requires in-depth integration of HBO, Warner Bros. and Turner, not to mention Otter Media, which is a big part of this as well — man, a lot of people said it couldn’t be done. This is exciting.”

AT&T CEO: 50 Million HBO Max Domestic Subs by 2025

AT&T projects WarnerMedia’s HBO Max subscription streaming service launching in early 2020 will top 50 million subscribers by 2025.

Speaking Oct. 28 on the fiscal call, CEO Randal Stephenson reiterated talking points outlined last week by WarnerMedia CEO John Stankey suggesting the SVOD platform will reach 80 million globally.

“This product is going to be very different from any other product you’ve seen in the market before,” Stephenson said, without elaborating.

AT&T is holding an Oct. 29 media day to discuss Max.

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The subscriber projections mirror Disney’s plan to attract 60 million subs to its Disney+ service launching Nov. 12.

Netflix and Amazon Prime Video lead the global SVOD market with more than 258 million combined subscribers.

To jumpstart HBO Max consumer traction, WarnerMedia reportedly will migrate existing HBO pay-TV and HBO Now subs to the new service for a free probationary period.

Subscriber stickiness will be key as AT&T’s DirecTV Now online venture has seen subscribers drop the monthly platform since initiating a price hike from the initial $34.99 price point.

DirecTV Now (now called AT&T TV Now) lost 195,000 subs in the most-recent fiscal period to end the quarter with 1.1 million subs.

“Our customer relationships are something any streaming company would want,” Stephenson said.

Pay-TV Shocker: AT&T Loses More Than 1.3 Million Q3 Subs, Including 195,000 OTT

HBO Max can’t come soon enough for AT&T.

The telecom giant Oct. 28 said it lost 1.16 million pay-TV subscribers in the third quarter (ended Sept. 30). It lost an additional 195,000 AT&T TV Now (formerly DirecTV Now) subs.

The losses compared with 346,000 pay-TV subs jettisoned and 49,000 DirecTV Now subs added in the previous-year period.

The company attributed the losses to customers rolling off promotional discounts, programmer disputes and competition, as well as lower gross adds due to the continued focus on adding higher-value subscribers.

In the past 12 months AT&T has lost more than 3.2 million pay-TV subs as subscribers migrate toward alternative video services, including over-the-top. It ended the period with 20.4 million combined DirecTV and U-verse subs compared to 23.3 million a year ago.

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AT&T TV Now has lost 713,000 subs since launching Nov. 30, 2016, as a $34.99 monthly standalone online TV service. It ended the period with 1.14 million subs compared to 1.85 million last year.

Unlike other pay-TV distributors, AT&T is not supplanting linear TV subs with high-speed Internet. The company lost 83,000 broadband subs compared to a net addition of 31,000 subs last year. It lost 36,000 DSL subs, an improvement from a loss of 45,000 subs in the previous-year period.

AT&T did add 318,000 high-speed fiber subscribers.

AT&T ended the period with 14.3 million broadband subs, down from 14.4 million a year ago.

“The strategic investments we’ve made over the last several years have given us the essential elements to meet growing demand for content and connectivity,” Randall Stephenson, AT&T chairman and CEO, said in a statement.

Stephenson remain upbeat on the company’s future saying the three-year plan delivers both “substantial and consistent” financial improvements over the next three years.

“We grow revenues, [pre-tax earnings] every single year, and free cash flow is stable next year, but then grows in both of the next two years, as well,” he said. “And all of this is inclusive of our investment in HBO Max.”

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 Reportedly Considering Spinning Off DirecTV or Merging Unit With Dish Network

Facing mounting mergers-and-acquisition debt, criticism from an activist investor and changing consumer habits toward pay-TV, AT&T is reportedly considering spinning off its DirecTV subsidiary or combining it with competitor Dish Network.

The Wall Street Journal, citing sources familiar with the situation, said CEO Randall Stephenson is exploring the option despite telling an investor event this week he still the supports the satellite TV business AT&T acquired in 2015 for $49 billion.

While nothing could come of the situation, Dish co-founder/CEO Charles Ergen Sept. 17 told the same investor group he welcomes merging the two satellite providers. Ergen tried pursuing DirecTV in 2014, but lost out to AT&T.

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Indeed, with 12 million subscribers — largely buttressed by standalone online TV service Sling TV — Dish would benefit from consolidation. AT&T has projected it would lose more than 1.4 million satellite subs in 2019, including rebranded DirecTV Now (AT&T TV) online subs.

However, when the former parents of Dish and DirecTV considered merging in 2001, federal regulators quashed the idea on antitrust issues.

The Trump Administration is still licking it wounds from a failed attempt to block AT&T’s acquisition of Time Warner — a move some observers contend was largely based on politics involving the president’s dislike of Time Warner subsidiary CNN.

How that would impact a Dish/DirecTV combination is anyone’s guess.

“From a regulatory perspective, it hasn’t been successful and I don’t know that there is any change in that regulatory perspective,” AT&T CFO John Stephens said recently. “I understand the industrial logic, but quite frankly it’s been tried and has been rejected.”

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.