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Telecom giant AT&T is optimistic that consumers will find the higher $15 a month price of upcoming streaming service HBO Max worth it compared with cheaper options, such as Disney+, president and COO and WarnerMedia CEO John Stankey told an investor conference Tuesday.
Disney+ has half the content “we have at half the price, and we [will] have twice the content we currently have at the same price” of the current HBO, he said at the UBS Global TMT (Technology, Media & Telecommunications) conference in New York in a session that was webcast. Arguing that HBO Max will have a “compelling price proposition” and that “appeals to the entire family,” Stankey added: “The household will be going to be saying that is a good investment for the household” with a “high utility factor.” And there will be “more than one segment of the household or the family that is going to sit down and watch at any given day.”
He also said that HBO Max’s approach is different from what Verizon, which has a partnership with Disney to provide Disney+ for free to certain subscribers, and others are offering. Disney+ is “a good product, they have done a nice job,” but its strongest appeal is to younger audiences, meaning “it’s not that deep,” while HBO Max wants to go broader to target the whole family.
Stankey also argued that consumers are likely to decide on several streaming services rather than just one. “I don’t think it’s a zero-sum game,” he said. “Many of these (services)…can be complementary.” Concluded the executive: “You would be hard pressed to suggest that Disney+ is a replacement service for Netflix…. You would be hard pressed to say Disney+ is a replacement service for Max. They are two different services and they are addressing different market segments.”
Discussing the May launch of HBO Max, Stankey also mentioned that AT&T is “one of the largest advertisers in the United States,” so there is a real opportunity for promotion across its businesses if done right. The firm can use “efficient digital techniques” in addition to macro brand and awareness building, he explained.
Stankey reiterated that the international rollout of HBO Max will depend on local markets and HBO’s and WarnerMedia’s presence there. For example, WarnerMedia recently extended a long-running deal with Sky in its European markets of the U.K., Ireland, Italy, Germany and Austria to leverage Sky’s reach there. In other European markets, WarnerMedia could decide to go directly to consumers with a launch of HBO Max if there is a “clear field to gain customers,” he added
Will WarnerMedia keep all its content for HBO Max in the future or continue to license some of the programming it makes? “We support HBO Max domestically,” Stankey said, adding that fourth-quarter financials will show some of the lost licensing revenue at WarnerMedia. But he emphasized that the firm is not out of the licensing business “by a long shot,” adding: “The studio will remain independent.”
Stankey at the UBS conference filled in for AT&T chairman and CEO Randall Stephenson who had originally been scheduled to speak at the event.
AT&T in late October reacted to activist investor Elliott Management with a three-year financial plan and a set of initiatives, saying it would review its asset portfolio, which signaled the potential sale of non-core businesses, engage in “no major” acquisitions and make some changes to its board.
Stephenson at the time said he would stay in his CEO post through at least 2020. The company will then separate the chairman and CEO roles and evaluate all potential CEO candidates.
Stankey, who was earlier this year also named president and COO of AT&T, has long been seen as the likely next CEO given his experience and rise at the company and his recent appointment as COO. But Elliott is understood to have pushed for a broader look at various candidates when Stephenson exits the CEO post.
As far as its various businesses go, AT&T said it would “continue to actively review its portfolio, analyze the merits of each business and monetize non-core assets.” The company has pursued efforts to reduce overall debt and operating costs.
After Elliott put a spotlight on DirecTV, the AT&T boss earlier this year also said the pay TV arm, which has been losing video subscribers, was no sacred cow. “DirectTV…will be an important part of our strategy over the next three years. But no portion of our business is exempt…. We’ll approach it with a fresh set of eyes around the evolving consumer environment.”
AT&T CFO John Stephens recently told an investor conference about pay TV subscriber trends that “we’re optimistic we’ve hit the peak of losses in the third quarter.”
AT&T in October, with its third-quarter financials, reported losing 195,000 subscribers at its DirecTV Now streaming service, after a 168,000 loss in the second quarter, while losing another 1.2 million premium TV subscribers at DirecTV and U-Verse.
“We’re looking for AT&T TV and the anniversary of this new intake approach to much more rational product offerings to take us forward,” Stephens said. “It’s a challenging business.” In 2020, he said, AT&T is looking for better premium TV subscriber numbers as it has fewer TV customers with promotional pricing on its books and launches AT&T TV, a premium streaming offering.
Stankey reiterated those sentiments, speaking of improved subscriber trends in 2020 thanks to a better video product.
Discussing cost savings, Stankey said that “no place is safe” for those. He said AT&T will end 2019 with $700 million-plus run rate synergies from the Time Warner acquisition and then get to the company’s $1.5 billion target. He mentioned labor as an opportunity for savings, citing streamlined management structures as one possibility along with corporate overhead and an optimization of benefits offered.
The UBS conference has attracted various top industry executives, including Comcast CFO Michael Cavanagh, who said Monday that the upcoming NBCUniversal streaming service Peacock would break even by year five.
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