AT&T CFO Talks HBO Max Launch, Film Release Strategy, Cost Cuts

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AT&T CFO John Stephens

John Stephens spoke at the Credit Suisse 22nd Annual Virtual Communications Conference.

AT&T is "pleased" with the early trends at recently launched streaming service HBO Max and continues to work with cinema operators on the "evolving" theatrical release schedule, CFO John Stephens told an investor conference on Wednesday. 

Stephens spoke at the Credit Suisse 22nd Annual Virtual Communications Conference in a session that was webcast, saying that while the novel coronavirus pandemic means "challenging times in the media business, we believe we got the best assets and the best platform to move forward." He particularly lauded the likes of CNN, Turner and HBO Max. 

Discussing the recently launched HBO Max, he wouldn't share early subscriber figures, but signaled the firm would provide those when it reports earnings in July. Stephens also said that the company feels "really good" about and was "pleased" with the HBO Max launch and that, amid the pandemic, "overall TV viewership [shows that] people are engaged," especially with streaming service HBO Now. He suggested that this was also good news for HBO Max.

"The content has been accepted well" despite some pandemic-driven changes to the rollout of originals, he added about the launch phase. "We feel really good about how it has gone."

Stephens concluded that the HBO Max rollout was "a multi-year process, but so far so good." And he lauded the "tremendous" international opportunity for HBO Max.

Has the pandemic pushed back plans to launch an advertising component of HBO Max? Stephens said it has affected the advertising market. "We are going to continue to work on that [aspect], ... but evaluate that" as the country comes out of pandemic and lockdown mode, Stephens said.

At WarnerMedia's Warner Bros. film unit, shuttered productions mean less cash spending, but also delayed productions, the AT&T CFO said during the conference. And he addressed the industry debate about premium VOD releases, saying the studio was continuing to work with cinema operators amid a fast-changing environment and an "evolving situation" and "changes in our schedules and our approach."

Stephens also discussed AT&T's telecom businesses. "Broadband is a very good story," he said. "Video continues to be a challenge" though, especially with small businesses shutting down in March and April, he said. He wouldn't promise that the pay TV business could grow its profitability this year amid the "challenging" environment.

During his appearance from his AT&T office, which he started by taking off a face mask that he says he has been wearing because the company is taking the pandemic seriously, Stephens also addressed asset sales to reduce AT&T's debt load, which stood at more than $150 billion at the end of 2019. "I feel really good about our flexibility," Stephens said about the company's debt and liquidity situation. And he said the firm was pushing forward with sales of about $3 billion of previously mentioned assets marked for divestiture and is also continuing its constant "portfolio reviews" to possibly reduce debt further and find money to put into growth areas. 

He didn't mention a possible sale of the firm's video games unit. CNBC last week reported that Warner Bros. was looking to sell its Warner Bros. Interactive Entertainment video gaming division, which owns and develops the Mortal Kombat fighting franchise, as well as games based on intellectual property (IP) owned by the Hollywood giant. That includes games tied to the Harry Potter and The Lego Movie franchises.

A sale deal could fetch $4 billion, with gaming giants Take-Two Interactive, Electronic Arts and Activision Blizzard all having expressed interest, according to the report. An AT&T representative said at the time: "We do not comment on rumor and speculation."

Cost reductions will also remain in focus for AT&T, Stephens said on Wednesday. Some of those could come from further sales of office buildings. "I have been on the path of reducing real estate," and amid the pandemic his team was considering accelerating that shift, he said, calling the pandemic an opportunity to "move quicker" on certain planned changes. He concluded there is "a lot of opportunity" on the cost side, including at WarnerMedia,

Earlier this year, AT&T said that John Stankey would succeed Randall Stephenson as CEO next month. Former Hulu boss Jason Kilar recently took over as CEO of WarnerMedia.