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).

WarnerMedia Planning to Launch Branded OTT Video Service

As expected, WarnerMedia (formerly Time Warner) is planning to launch over-the-top video service featuring Warner Bros. and HBO catalog content, in addition to Turner Sports fare. The media company will disclose more details in the fourth quarter, AT&T CEO Randall Stephenson told an investor group.

Speaking Sept. 12 at Goldman Sachs 27thAnnual Communacopia confab in New York, Stephenson said premium digital content – notably HBO – is the focus in today’s home entertainment market.

“HBO, we think in terms of SVOD, is a very unique asset,” Stephenson said. “Netflix is the Walmart of SVOD and HBO is the Tiffany. It is a very premium high-end brand. And Turner is one of the best networks around.”

The executive’s comments underscore AT&T’s main decision to spend $85 billion acquiring Time Warner – a transaction currently under appeal by the Department of Justice: Premium content.

“Longform scripted content for a world of media, we like what we’ve got,” Stephenson said. “And digital, CNN.com is the most-visited news website in the world.”

And with that content, Stephenson said it is imperative to deal directly to the consumer. He said existing media companies have traditionally operated on a wholesale business model. Today, these companies have to aggressively go after the consumer with OTT video.

“Direct-to-consumer relationships are really critical. And with AT&T, we have 170 million direct-to-consumer relationships … to leverage and distribute this content,” he said. “And if you put together CNN.com, BleacherReport and Otter Media, the monthly … number gets closer to 300 million.”

Indeed, Stephenson and WarnerMedia CEO John Stanley contend HBO remains an underutilized brand. In an earlier town hall meeting among employees over the summer, Stankey said he would tighten the screws on HBO, in addition to upping production budgets.

Stephenson reiterated that pledge.

“You’d like to fill out the schedule on HBO … but we’re not talking about Netflix-scale investments,” he said.

When asked about the DOJ’s appeal, Stephenson said 600 days had transpired since AT&T first announced its intention to acquire Time Warner. He called it an interesting process.

Specifically, Stephenson said DOJ’s antitrust case was not “very compelling,” adding the federal judge’s order revealed the government’s weaknesses in the case.

“So, the DOJ lost this case and the burden of proof was on them. And they didn’t come close to meeting the burden of proof,” he said. “And now they appeal. We don’t have to overcome the burden of appeal.”



WarnerMedia Boss Looking for Larger OTT Video Audience

Size matters to WarnerMedia CEO John Stankey. The new boss at the former Time Warner (Turner, HBO and Warner Bros.) wants to bring scale to WarnerMedia’s slate of pending and existing direct-to-consumer platforms.

And that begins with HBO. As has been previously reported, Stankey seeks to up the premium channel’s original content slate through increased spending and year-round releases.

“My goal is to give the HBO team the resources to greenlight additional projects already in the development funnel,” Stankey said on the July 24 fiscal call. “That would keep consumers from jumping in-and-out of [HBO Now]. If we can smooth [program] scheduling, then we drive down churn, improve retention and subscriber growth.”

Second-quarter (ended June 30) operating income at HBO remained essentially flat at $530 million. Growth in revenue was offset by increased expenses, including programming and marketing costs. Programming expenses increased 15% due to higher original and acquired programming costs. The increase in marketing costs was related to original programming. Operating income included $39 million of costs related to the AT&T merger.

AT&T CEO Randall Stephenson said traditional and new-age media companies are all pursuing the same goal of selling directly to consumers.

“The modern media company must develop extensive direct-to-consumer relationships,” he said. “And we think pure wholesale business models for media companies will be really tough to sustain over time. The recent valuations of media companies are reinforcing this point.”

Both Stephenson and Stankey contend bundling WarnerMedia brands is the best way to bring larger audiences to individual OTT platforms. AT&T has about 170 million customers across its various distribution channels, including mobile, satellite, broadband and telecom.

“If you put CNN.com, Otter Media (which AT&T co-owns with The Chernin Group) and Bleacher Report together, there are almost 200 million unique monthly users to each of those sites,” Stephenson said. “This is a scaled direct-to-consumer business.”

The CEO believes that personalizing content and advertising through OTT video will create “unique” consumer experiences.

“It’s pretty exciting,” Stephenson said.

Stankey said that since the close of the $85 billion Time Warner acquisition, corporate has been busy with the “blocking and tackling” that comes with a merger, including integrating corporate and staff functions, and aligning corporate management as part of $2.5 billion in group synergies.

The executive wants to expand audiences for OTT ventures, including HBO Now and recently launched DC Universe platform.

“They’re all good within their own right, [but] they generate what I would consider to be small-scale audiences,” Stankey said. “A company our size, we want to be generating audiences in the tens of millions. Not in the single-digit millions.”

The executive believes WarnerMedia’s strong brands are more powerful when bundled together than as stand-alone properties.

“So, over time we are going to think about how the discreet brands we have [can be unified] into a more consistent, more-focused experience,” he said. “That starts to bring some scale.”


AT&T Set to Bow ‘Very Skinny’ TV Bundle This Week

Fresh off its $85 billion acquisition of Time Warner, AT&T this week will formally launch an online TV service free to its unlimited wireless subscribers; $15 monthly on any other platform.

Dubbed “AT&T Watch TV,” the service differs significantly from $35 monthly DirecTV Now since programming is limited to Turner (TBS, TNT, CNN, Cartoon Network) content and no live sports.

The burgeoning online TV market featuring premium pay-TV channels without a long-term contract also includes Dish Network’s Sling TV, Sony’s PlayStation Vue, Google’s YouTube TV and Charter’s Spectrum TV Plus.

“There’s going to be opportunities to distribute premium video like we never imagined,” CEO Randall Stephenson told CNBC. “The tech companies are just demonstrating that to us. So, we want to participate in this.”

Content distribution is what fueled AT&T’s acquisition of DirecTV, the subsequent launch of over-the-top video platform DirecTV Now and most-recent purchase Time Warner, which includes Warner Bros., HBO and Turner.

Last month, AT&T launched new capabilities and options for DirecTV Now, including an updated user interface. Subscribers can add a third simultaneous stream for an additional $5 per month and will get a beta version of cloud DVR functionality with 20 hours of free storage. This summer, AT&T plans to roll out an option to purchase 100 hours of storage for $10 per month.

The company also plans to launch a broadband-based premium SVOD service aimed at competing with traditional linear TV products for in-home use, John Donovan, CEO of AT&T Communications, told an investor group in May.

The product will be app-based with a small device that connects to customers’ TVs and home broadband. The ($80-$90 monthly) service will offer the content available on traditional linear TV with a great user experience and lower price points.

“We won’t roll a [service] truck. The CPE [customer premises equipment, or network, set-top box, etc.] will be cheaper and have lower operating costs,” Donovan told the MoffettNathanson Media & Communications Summit in New York.




AT&T Boss Sends Mixed Messages Following Time Warner Acquisition Close

NEWS ANALYSIS — Following consummation of AT&T’s $85 billion acquisition of Time Warner, AT&T CEO Randall Stephenson sent out a staff memo welcoming Time Warner — which includes Warner Bros., Turner and HBO — to the fold.

“As different as our businesses are, I think you’ll find we have a lot in common,” Stephenson said, adding, “We’re big fans of your talent and creativity. And you have my word that you will continue to have the creative freedom and resources to keep doing what you do best.”

Commonality is always a slippery slope in corporate mergers. Shared interests often translate into operational redundancies that require fiscal cutbacks and eliminated positions.

AT&T projects $1.5 billion in annualized cost “synergies” by end of the third year of the acquisition.

Indeed, in a separate statement, AT&T said Time Warner would be folded into the telecom’s media business segment headed by John Stankey, with a new brand name to be announced.

As previously reported, Time Warner CEO Jeff Bewkes will continue for a limited time as a senior advisor during the transition. All of Bewkes’ direct reports now answer to Stankey, which include Kevin Tsujihara, CEO of Warner Bros., John Martin, CEO of Turner, and Richard Plepler, CEO of HBO.

“We’re going to bring a fresh approach to how the media and entertainment industry works for consumers, content creators, distributors and advertisers,” said Stephenson.

How that “fresh” approach works out for Warner remains to be seen.

Tsujihara, in May, initiated a string of management changes that included the promotion of Jim Wuthrich to president of worldwide home entertainment and games. Wuthrich reports to Ron Sanders, president of worldwide theatrical distribution and home entertainment.

Warner Bros. Home Entertainment reported a near 6% increase in fiscal 2017 revenue to $1.56 billion from physical and digital sales of movies — up from $1.48 billion in 2016. Sales of TV content on disc and digital declined 11% to $418 million from $470 million.

Corporate Apology Tour Goes Public Following Michael Cohen Hire

NEWS ANALYSIS – Showtime’s compelling drama, “Billions,” showcases fictional machinations and strange bedfellows underscoring Wall Street greed and political malfeasance.

A setting apparently not unlike corporate America operating under President Donald Trump.

AT&T CEO Randall Stephenson May 11 became the second senior executive to apologize to employees for corporate decisions related to the hiring of Trump’s personal attorney Michael Cohen to gain better insight into the president’s mindset and executive decision making.

Media reports say AT&T paid Cohen $600,000 to assuage Trump on the merits of its $85 billion acquisition of Time Warner, which includes Warner Bros., Turner and HBO.

Trump, on the campaign, had voiced opposition toward the merger – a stance many observers attributed more to his dislike of CNN, which is owned by Turner, than concern for consumers.

The AT&T/Time Warner deal appeared heading to regulatory closure when the Department of Justice filed an antitrust lawsuit in opposition. A federal judge will rule on the matter in June.

Cohen, of course, is much more than a lawyer and confidante for Trump. His skills reportedly revolve around “fixing” Trump’s problems – including an alleged 2006 affair with porn star Stormy Daniels, in which Cohen facilitated a $130,000 hush payment to Daniels before the 2016 election.

The AT&T/Cohen connection was first disclosed by The New York Times.

Calling the matter, a PR blunder, Stephenson, in a letter to employees, said the decision had damaged AT&T’s reputation and put the telecom in the headlines for “all the wrong reasons.”

“There is no other way to say it, AT&T hiring Michael Cohen as a political consultant was a big mistake,” Stephenson wrote.

Novartis CEO Vasant Narasimhan the same day issued a similar memo to employees after it was disclosed the pharmaceutical giant paid Cohen $1.7 million for guidance regarding Trump’s approach to healthcare policies.

“We made a mistake in entering into this engagement and, as a consequence, are being criticized by a world that expects more from us,” Narasimhan wrote, as reported by CNBC.

AT&T Planning $15 Online TV Service

On the witness stand defending his company’s $85.4 billion acquisition of Time Warner as pro consumer, AT&T CEO Randall Stephenson took the opportunity to announce the pending roll out of a $15 monthly online TV service.

Dubbed “AT&T Watch,” the platform would be the cheapest online TV service on the market — $5 less than Dish Network’s Sling TV. It will be marketed as a cheaper version of $35 DirecTV Now with fewer channel selections and no access to live sports, among other restrictions.

The Justice Department last year filed an antitrust lawsuit against the merger, claiming the deal would be bad for consumers. AT&T and Time Warner say the merger helps them stay competitive in the rapidly changing home entertainment market driven by over-the-top video.

AT&T currently offers DirecTV Now at reduced rates, including HBO, in select markets. Sprint Wireless and T-Mobile include free Hulu and Netflix, respectively.

Stephenson said “Watch” would be available free to wireless subscribers – underscoring the probability the platform would be ad-supported and geared toward mobile users.

The platform was hinted at during a pretrial brief.

“The merger will enable AT&T to transform the mobile video marketplace by combining Time Warner’s content assets with its wireless platform to develop new and more valuable services especially for mobile video devices,” AT&T wrote in the brief, as reported by CNN Money. “For example: AT&T would launch a new service with Turner and a small number of popular cable networks, which would be made available for free to AT&T’s wireless customers on unlimited plans and for a nominal price to anyone else.”


AT&T CEO Seeks Internet Bill of Rights

AT&T CEO Randall Stephenson Jan. 24 penned an open letter on the telecom’s website asking Congress to enact an “Internet Bill of Rights.”

Stephenson contends legislation – unlike net neutrality – is required to not only ensure consumers’ rights, but also provide consistent rules for all Internet companies across all websites, content, devices and applications.

“It is time for Congress to end the debate once and for all, by writing new laws that govern the Internet and protect consumers,” Stephenson wrote.

The executive’s concern might appear sincere to Rip Van Winkle. But to anyone else paying attention to the net neutrality debate, AT&T is no fan of regulation.

As one of the nation’s largest Internet service providers (ISPs) along with Comcast, Verizon and Charter Communications, AT&T in 2015 spearheaded legal challenges against FCC-enacted net neutrality guidelines under the Obama Administration mandating an open Internet, among other provisions.

The FCC, in turn, alleged AT&T and Verizon violated open Internet provisions by exempting data caps for proprietary video services on their wireless networks.

In a Dec. 1, 2016 letter from Jon Wilkins, chief, wireless telecommunications bureau at the FCC, the agency said the telecom’s sponsored data program denied “unaffiliated third-party streaming services the same ability to compete on AT&T’s network at similar [financial] terms.”

While Stephenson, in the letter, made no mention of the current FCC under Trump-appointed chairman Ajit Pai – which rolled back net neutrality provisions earlier this year – he pledged AT&T would not block websites, censor online content, throttle, discriminate, or degrade network performance based on content.

“We have publicly committed to these principles for over 10 years,” he wrote.

Gigi Sohn, a former senior staffer at the FCC under chairman Tom Wheeler, bristled at Stephenson’s feigned altruism.

“They’ve done everything in their power to undermine consumer protections, competition, municipal broadband,” Sohn told TechCrunch.com.

She and other net neutrality advocates say the importance of the Internet in the 21st century mandates it be regulated as a utility.

Sohn, and others, believe Stephenson’s ulterior motive is to get Congress to regulate so-called “edge providers” such as Google, Facebook, Amazon, Netflix, Twitter and Microsoft, among others, which have helped redefine how consumers access information and entertainment with little or no regulation or taxation.

FCC chairman Pai, in a speech last November, decried edge providers as the real threat to the Internet and consumer rights through ideology and other subjective criteria.

“They might cloak their advocacy in the public interest, but the real interest of these Internet giants is in using the regulatory process to cement their dominance in the Internet economy,” Pai told R Street Institute, a New York-based free market think tank.