AT&T Head Says Time Warner Deal Is About Advertising

Randall Stephenson - Time Warner News Conference - Getty - H 2017
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Randall Stephenson told investors that AT&T wants to do for premium video advertising what Facebook and Google have done for digital advertising.

Randall Stephenson, AT&T chairman and CEO, on Tuesday said the pending Time Warner deal is about creating more targeted advertising for premium video products, and thus profitability.

"Advertising is a significant part of this equation," Stephenson said at the J.P. Morgan Technology, Media and Communications Conference in Boston during a session that was webcast. He was speaking as a U.S. judge considers the AT&T and Time Warner merger as part of an antitrust showdown with the U.S. Department of Justice.

During the session, Stephenson focused on harnessing premium video, technology and data to make advertising more effective in a post–Time Warner acquisition world. "This is taking to the world of premium video what Facebook and Google have done so expertly in the world of digital," he argued. 

The Time Warner deal, Stephenson added, where AT&T swallows a host of film and TV assets, will make the phone giant a major media power player after its earlier acquisition of DirecTV. But the deal first has to survive regulatory and judicial scrutiny.

The U.S. government argues that allowing AT&T to join forces with one of the nation's biggest content producers would create competitive harm as AT&T/Time Warner exploits its newfound power in carriage negotiations with cable and satellite companies. AT&T rejects the argument that there's competitive harm or that it has breached antitrust law.

Amid that battle, Stephenson told the investors conference that pairing a large advertising inventory with 159 million mobile subscribers, 40 million pay TV subscribers, DirecTV Now, HBO Go and other digital platforms will create a media powerhouse in the advertising realm.

"There's a significant amount of data in our distribution business, and pairing that — the viewership insights, the location data — with the premium ad inventory, we're convinced that there's a sizable monetary opportunity," Stephenson told investors. Amid a increasingly interconnected media landscape, AT&T hired Brian Lesser away from ad giant WPP to use content, data and analytics to better target households with advertising.

"He is sitting and idle and ready to go after we close the Time Warner transaction," Stephenson said. And that exploitation of premium content and advertising will take place on streaming platforms, not linear TV platforms, he added.

"It is streaming content on mobile devices, on smart TVs," he insisted. AT&T in the over-the-space will also offer a range of content packages, from a $15 per-month all-entertainment skinny bundle with no sports up to mid-size and large content bundles.

Stephenson also touted a new streaming version of DirecTV Now, to be launched on Tuesday afternoon, with a cloud-based DVR for program recording and new system features. Viewers will be able to watch up to three streams at a time. The new DirecTV Now streaming service will be priced at $40 per month.