AT&T Boss: HBO Max to Offer Live Sports, News — in the Future

HBO Max, WarnerMedia’s pending subscription streaming service, will “ultimately” offer live sports and news, in addition to original and catalog programming, Randall Stephenson, CEO of parent AT&T, told investors.

Speaking July 24 on the fiscal call, Stephenson said the branded OTT service would be revealed in further detail to investors in a presentation on the Warner studio lot in Burbank, Calif., on Oct. 29.

“You should assume that ultimately HBO Max will have … live sports and premium sports,” Stephenson said. “Those are going to be really, really important elements for HBO Max. The same with news.”

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The live programming and sports elements would significantly differentiate HBO Max from Netflix, Amazon Prime Video, Disney+ and Hulu, which cater to original and catalog programming.

AT&T CEO Randall Stephenson

In fact, Netflix remains adamant it will not offer live sports, a market Prime Video dabbles in with Major League Baseball and Premier League soccer in the United Kingdom.

WarnerMedia, the media successor to Time Warner, last week revealed the management team behind HBO Max, which is slated to launch in Spring 2020.

While banking on the HBO brand, the streaming service will borrow liberally throughout the WarnerMedia business portfolio, which includes Turner and Warner Bros.

Indeed, Turner has pay-TV carriage license agreements with MLB, the NBA and NCAA March Madness men’s national championship tournament. How those contracts would relate to HBO Max remains to be seen. But Stephenson doesn’t see a problem.

“There’s a lot of opportunity to take advantage of the unique content deals that we have within WarnerMedia,” he said.

The CEO said the recently-ended HBO series “Game of Thrones” significantly increased HBO digital subscribers – a trend he hopes will continue with Max.

“HBO Max will be a key part of this wireless strategy as we get into next year pairing unique premium video content with our wireless, TV and broadband business,” Stephenson said. “[It] is going to be something special in the marketplace. And the implications of that to profitability, we think, are pretty important.”

 

 

AT&T CEO: WarnerMedia Looking to Partner SVOD Service With Pay-TV Operators

WarnerMedia’s pending fourth-quarter soft-launch of a branded subscription streaming video service will look to partner with — rather than antagonize — third-party pay-TV operators.

Speaking May 14 at the JPMorgan Global Technology, Media and Communications  Conference in New York, Randall Stephenson, CEO of AT&T, said the service would be centered around HBO and be included with a pay-TV subscription.

“The MVPDs, Comcast, we think are going to be an important partner to all of this,” Stephenson said. “If you’re a Comcast subscriber and you acquire HBO, you will get this [OTT video] capability with your HBO subscription on Comcast.”

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The proposed symbiotic relationship between SVOD and linear television distribution is significant considering the former was launched in part to replace pay-TV.

Indeed, Dish Network launched pioneering Sling TV in 2015 in an effort to offset declining satellite TV subscribers. AT&T followed with DirecTV Now.

Yet, online TV subscriber growth has cooled. Sling added just 7,000 subscribers in the most-recent fiscal period, and DirecTV Now lost 83,000 subs compared to a gain of 312,000 subs last year.

Stephenson said the new SVOD service is projected to generate “tens of millions of subs” — a figure dependent upon AT&T sustaining its base of DirecTV and U-verse subscribers.

The strategy is not dissimilar with Comcast, which plans to launch an OTT service free to Xfinity subscribers, with non-subscribers charged a monthly fee.

“Keeping the satellite, the U-verse customer base in check and stable is really important because it’s going to be a major distribution platform [for SVOD],” Stephenson said. “And then we want to just continue to push digital distribution on top of that as well.”

Much of that distribution will be centered around HBO, which is currently generating strong viewership through the last season of “Game of Thrones”.

Stephenson said content investment at HBO has “stepped up considerably” this year with the second seasons of “Big Little Lies” and “Succession” slated to follow “Thrones,” in addition to new series, “Chernobyl”.

“We’ve got a lot of really great content coming online as ‘Game of Thrones’ winds down,” he said.

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.

 

AT&T Eyeing HBO, Warner Content for AVOD Distribution

AT&T currently markets standalone over-the-top video services DirecTV Now and Watch TV — the latter offering mobile access to 30 pay-TV channels for $15 monthly and no long-term contract.

Watch TV has generated about 500,000 subscribers since its debut last June. DirecTV Now, which jettisoned more than 260,000 subs after ending promotional pricing late last year, has about 1.6 millions subs.

The telecom now appears to be considering ad-supported VOD — long a stepchild to subscription streaming VOD service such as Netflix, Amazon Prime Video and Hulu.

With Amazon subsidiary IMDb.com launching a free ad-supported VOD service, Hulu’s basic SVOD plan featuring commercials, and Comcast launching AVOD for Xfinity subscribers in 2020, AT&T is pondering ad-supported distribution for select content from subsidiary WarnerMedia.

Speaking on the Jan. 30 fiscal call, CEO Randall Stephenson reiterated that companies with “very strong” IP, “deep libraries” of IP are the ones that are going to succeed over time.

He said Warner Bros. CEO Kevin Tsujihara and WarnerMedia boss John Stankey have been analyzing optimal distribution channels and license opportunities for content.

Tsujihara helped craft the recent non-exclusive license extension with Netflix for “Friends,” a deal that lets WarnerMedia stream the venerable sitcom through its pending SVOD service launching later this year.

Stephenson said WarnerMedia content would be targeted toward what he called “two-sided” business models that include SVOD and AVOD.

“There’s a demand and the customers have become accustomed to advertising free subscription services,” he said. “And we think HBO and a lot of the Warner content [is] premium content will fit into that mold.”

While Stephenson didn’t reveal AVOD specifics, he said the recent acquisition of Xandr to help sell targeted digital advertising to AT&T’s 170 million mobile and broadband subscribers, underscored opportunities for advertising-supported models that help keep content (i.e. catalog) prices down, keep consumer costs down and help fund additional content acquisition and purchasing.

“Xandr is a big part of making that model work,” he said. “So, our model will be a two sided model, with a heavy subscription service, with some ad-supported elements to it as well.”

 

 

 

AT&T Posts 267,000 DirecTV Now Q4 Subscriber Losses

Stop the funeral for pay-TV.

AT&T’s signature alternative — broadband-based DirecTV Now — suffered a major blow in the fourth quarter, ended Dec. 31, 2018.

The telecom Jan. 30 reported that the standalone online TV service lost 267,000 subscribers compared to gains of 368,000 subs in the previous-year period. The period included 65,000 free trial subscriptions.

AT&T attributed the decline to ending the service’s $35 monthly promotional pricing.

The tally does not include WatchTV, AT&T’s recent app-based $15 online TV service, which ended the year with 500,000 subscribers.

DirecTV Now ended the year with 1.59 million subs compared to 1.15 million subs at the end of 2017.

The subscriber loss is a shot across the bow for online TV, which launched in 2015 with Dish Network’s Sling TV. Hailed as an antidote to declining pay-TV – and SVOD – online TV offered premium TV channels without long-term contract at a fraction of the price of the traditional cable bundle.

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Yet, AT&T’s legacy U-verse pay-TV service added 12,000 subscribers, compared to a loss of 60,000 video subs last year. The distribution channel ended the year with 3.68 million subs compared to 3.63 million at the end of 2017.

The company ended the year with 14.4 million high-speed Internet subscribers, which was up a scant three-tenths of a percent from 14.35 million at the end of 2017.

Meanwhile, satellite service DirecTV lost 403,000 subscribers in the quarter – up 274% from a loss of 147,000 subs in the previous-year period.

El Segundo, Calif.-based DirecTV ended the year with 19.2 million subs – down 6% from 20.4 million subs at the end of 2017.

For AT&T CEO Randall Stephenson, reducing the company’s $183 billion debt load following the $85 billion acquisition of Time Warner is the No. 1 goal in 2019.

“In 2018, we generated record free cash flow while investing at near-record levels,” Stephenson said in a statement. “Our dividend payout as a percent of free cash flow was 46% for the quarter and 60% for the year, allowing us to increase the dividend for the 35th consecutive year. This momentum will carry us into 2019 allowing us to continue reducing our debt while investing in the business and continuing our strong record for paying dividends.

 

Federal Appeals Court Questions DOJ Economic Concerns Regarding AT&T/Time Warner Union

Federal Appeals Court judges Dec. 6 questioned lawyers representing the Department of Justice about the government’s economic concerns regarding AT&T’s $85 billion acquisition of Time Warner.

The Justice Department’s antitrust division filed an appeal of a district court judge’s June approval of the merger that resulted in the formation of WarnerMedia — citing the deal would lead to higher pay-TV pricing and content blackouts for consumers, among other issues.

Government attorney Michael Murray argued U.S. District Court Judge Richard Leon erred in “economic logic and reasoning” in relation to possible blackouts of consumer access to content occurring during carriage disputes between content holders and pay-TV and over-the-top video distributors.

“‘Incentives remain the same’ for a super company to threaten a ‘blackout,’ in which it withholds content from distributors, in order to cripple rivals,” said Murray, as reported by CNN Business.

But D.C. Circuit Court of Appeals Judge Robert Wilkins countered that there exist arbitration procedures in place for carriage disputes  — systems Wilkins said Judge Leon used in his decision.

“So how can we just ignore that and say the district court has irrationally switched positions?” asked Wilkins.

Speaking Dec. 4 the UBS 46thAnnual Global Media and Communications confab in New York, AT&T Randall Stephenson remained optimistic the appeals court would validate the merger.

Specifically, Stephenson said the appellate court is looking for errors in law, not whether the district court judge “gets the facts right or not.” He said AT&T hired appellate lawyers during the original trial to consult on the strength of their case as it applied to the rule of law.

“We feel like Judge Leon wrote a pretty tight order and it was an order that was very fact-specific to the AT&T/Time Warner case, and so we feel like we have an order that should stand up well in the appellate review,” Stephenson said. “And so, we’re anxious to get this piece of it behind us.”

 

Wither HBO Now?

With WarnerMedia launching a branded subscription streaming video platform next year that will incorporate original and catalog content from HBO, Warner Bros. and Turner, in addition to third-party providers, the question arises: What will become of standalone SVOD service HBO Now?

Launched in 2014, HBO Now topped 5 million subscribers earlier this year. WarnerMedia is wrapping much of its unnamed OTT product around the HBO brand, with tiers of service ranging from studio movies to original series such as “Game of Thrones” and “Westworld,” among others.

Speaking Dec. 4 at the UBS 46th Annual Global Media and Communications confab in New York, AT&T CEO Randall Stephenson reiterated that the WarnerMedia streaming platform would not be another Netflix — focusing instead on Warner, HBO and Turner content.

“The goal of [CEO] John Stankey and WarnerMedia is not to create a direct-to-consumer product that rivals Netflix in terms of being a warehouse of content,” he said, adding that traditional pay-TV business models distributing wholesale content are old-school.

“Those businesses are getting disrupted aggressively,” Stephenson said.

The executive said the market needs an OTT product that “can achieve a very high penetration of [WarnerMedia] content with audiences.”

And HBO — via HBO Now — has its foot in the door.

“All media companies are coming to grips with the reality to better establish a direct relationship with [their] audiences,” Stephenson said. And with more than 140 million pay-TV subscribers globally, HBO resonates.

“I once compared Netflix to Walmart — not derogatorily … but when I’m shopping [and] I need something … I go to Walmart,” Stephenson said. “Well, if you’re looking for video content, regardless what it is, people will go to Netflix because it is just a warehouse. And it’s an impressive warehouse. That is not our ambition.”

Stephenson said management recognizes the need to ramp up original content spending at HBO — infusing the platform with year-long new offerings in addition to platform investment.

“[HBO boss] Richard Plepler is pretty excited,” Stephenson said. “He knows how to put together programming that will attract audiences. We’re very confident we’re going to have an HBO product that’s more fulsome.”

With WarnerMedia representing 17% of AT&T’s profitability, Stephenson said Warner Bros. remains a significant creator of TV content — including producing 70 scripted TV series in the past year to third parties including Netflix.

The executive mentioned Netflix had resigned license rights to Warner Bros.’ venerable sitcom “Friends” on a non-exclusive basis.

“That means ‘Friends’ can go onto our platform as well,” Stephenson said.

“We think we have enough IP and capability we can put together a product that will be very attractive,” he said. “It’s not a pervasive library of content warehouse like Netflix, but we think it is a very impressive product that will achieve very high penetration. Expectations are very high for this product.”

WarnerMedia OTT Video Platform to Offer Three Service Tiers

WarnerMedia’s much-anticipated over-the top video platform launching in the fourth quarter of 2019 will include three levels of service: an entry-level movie-focused package; a premium service with original programming and theatrical movies; and a third service that bundles content from the first two plus an extensive library of Warner Bros., HBO and Turner programming and licensed content.

Speaking Nov. 29 at the telecom’s analyst day event in New York, CEO John Stankey, CEO of WarnerMedia said the company’s unnamed/unpriced SVOD service would complement existing business (i.e. HBO Now with 5 million subscribers); benefit current distribution partners; expand the audience and increase engagement around content; and provide data and analytics to inform new products and better monetize content.

Stankey said the SVOD service would be a combination of original content, movies, TV shows, library fare and third-party programming.

“It’s a software experience wrapping creative excellence, that we’re going to showcase specific brands … to help the consumer find the right kind of curated content they want,” he said. “It’s gotta be a great value proposition.”

Separately, CEO Randall Stephenson said the merger with Time Warner continues to take a lot of time …”Unfortunately, a lot of it involve[s] litigation with the government.”

The CEO was referring to the Justice Department’s decision to appeal an unfavorable federal judge’s antitrust decision approving AT&T’s $85 billion acquisition of Time Warner.

The U.S. District Court of Appeals in the District of Columbia is expected to rule early next year.

“We are well positioned for success as the lines between entertainment and communications continue to blur,” said Stephenson. “If you’re a media company, you can no longer rely exclusively on wholesale distribution models. You must develop a direct relationship with your viewers. And if you’re a communications company, you can no longer rely exclusively on oversized bundles of content.”

Indeed, AT&T’s core DirecTV pay-TV service suffered through one of its worst fiscal quarters, losing nearly 350,000 subscribers. The losses were offset to a degree by DirecTV Now, the standalone SVOD service with about 1.8 million subs.

AT&T warned that elimination of promotional pricing at DirecTV Now would likely result in negative net sub adds in the fourth quarter of 2018 and in 2019.

AT&T CEO Calls on Congress to Restore Net Neutrality

AT&T chairman/CEO Randall Stephenson apparently believes in miracles.

Speaking Nov. 12 at the Wall Street Journal’s WSJ Tech D. Live confab in Laguna Beach, Calif., Stephenson called on politically-divided Congress to enact net neutrality guidelines for the nation’s Internet service providers.

It was wishful thinking, Stephenson agreed, joking the lawmakers can’t agree on the freezing temperature of water.

“I get fatigued every time the President changes, the head of the FCC changes, and regulations swing from left to right,” he said.

Indeed, with politics driving the Obama-era net neutrality guidelines enacted in 2015 by the Federal Communications Commission, a slightly revamped FCC three years later under President Trump rescinded the provisions that sought to treat the Internet as a utility, intending to safeguard content distribution against ISPs throttling, denying access, and charging higher prices for faster streaming speeds, among other issues.

To Stephenson, whose telecom is both an ISP and streaming content distributor and creator through subsidiary WarnerMedia, the lack of clear regulation will only encourage individual states to employ their own versions of net neutrality – as California lawmakers voted to do this year.

“What would be at total disaster for the innovation we see in Silicon Valley is to pick our head up and have 50 different sets of rules across the U.S.,” Stephenson said.

Current FCC chairman Ajit Pai – an Obama nominee upped to head the agency by Trump – has argued that net neutrality is regulation in search of an industry.

“It is not the job of the government to pick the winners and losers of the internet … We should have a level playing field [via market forces],” Pai said earlier this year.

Critics contend the lack of regulation hurts consumers. FCC Commissioner Jessica Rosenworcel – a Democrat – said reversing net neutrality put the FCC “on the wrong side of the American public.”

The U.S. Supreme Court earlier this month declined to hear a case brought by the telecommunications industry and the Department of Justice seeking to reverse a lower appeals court ruling upholding the subsequently rescinded Obama-era guidelines.

The Supreme Court’s lack of action does not reverse the repeal of the net neutrality guidelines, and leaves the door open to future litigation should a future FCC restore the guidelines.

The latest round of net neutrality lawsuits involves the Trump Administration, arguing the supremacy clause gives the Federal government the sole authority to regulate the Internet in the United States, suing states attempting to enact their own stricter guidelines.

 

 

Warner Bros. Posts Flat Q3 Operating Income Due to Higher TV Production Costs

Warner Bros. Oct. 24 reported third-quarter (ended Sept. 30) operating income of $576 million, which was essentially comparable to operating income of $578 million during the previous-year period. Revenue increased 7.5% to more than $3.7 billion from $3.4 last year.

The results represent the first under new corporate umbrella WarnerMedia, which includes Warner, HBO and Turner, and was formed following AT&T’s $85 billion acquisition of Time Warner.

The studio, which includes Warner Bros. Home Entertainment, generated nearly $1.7 billion in revenue from theatrical product, flat with last year. TV content revenue increased more than 20% to nearly $1.6 billion from $1.3 billion. Warner generated another $435 million from video games – down nearly 5% from $455 million last year.

Television revenue increased primarily due to higher licensing of series and initial telecast revenue. Theatrical revenue remained essentially flat as the prior-year quarter included a more favorable mix of theatrical and home entertainment releases, including Annabelle: CreationDunkirk, It and Wonder Woman, partially offset by higher television licensing revenue of theatrical product and the theatrical releases Crazy Rich Asians, The Meg and The Nun in the current-year period.

Indeed, Wonder Woman, which was the fourth-highest selling packaged media release in 2017, has generated another $11 million in disc sales in 2018, according to The Numbers.com. Dunkirk, which generated $21 million combined DVD/Blu-ray Disc unit revenue last year, has sold $9 million worth of discs this year. Horror film Ithas sold nearly $35 million worth of discs.

Warner third-quarter operating expenses were $3.1 billion, up 9.1% versus the third quarter of 2017 primarily due to increased television production costs related to the higher number and mix of produced series. Operating income growth was essentially flat as growth in revenues was offset by higher costs, primarily related to increased television production costs.

TV broadcast productions in the quarter included “God Friended Me”(S1, CBS), “Lethal Weapon”(S3, FOX), “Manifest”(S1, NBC), “Murphy Brown”(S1/revival, CBS), “The Voice”(15th cycle, NBC), “Young Sheldon”(S2, CBS), “All American”(S1, The CW), “The Flash”(S5, The CW), “Riverdale”(S3, The CW), and “Splitting Up Together”(S2, ABC).

TV productions for pay-TV and over-the-top video include: “Castle Rock”(S1, Hulu), “You”(S1, Lifetime), “The Chilling Adventures of Sabrina”(S1, Netflix), “Titans”(S1, DC Universe), and “The Kominsky Method”(S1, Netflix).