×
You will be redirected back to your article in seconds

AT&T CEO Compares HBO to Tiffany, Netflix to Walmart

Telco plans to announce direct-to-consumer service in Q4 spanning WarnerMedia properties

Netflix is like the Walmart of subscription video — while HBO is Tiffany & Co., according to Randall Stephenson, AT&T’s chairman and CEO.

Stephenson also said AT&T is looking to launch a new direct-to-consumer model for WarnerMedia (the former Time Warner), built around the Warner Bros. content library and including content from HBO and Turner Sports. The company plans to reveal more details of the new direct-to-consumer streaming plans in the fourth quarter of 2018, he said, speaking at the Goldman Sachs Communacopia conference in New York City.

The new direct-to-consumer business initiative for WarnerMedia, led by CEO John Stankey, will “bring all the assets AT&T to bear,” said Stephenson.

The AT&T boss suggested that HBO is the crown jewel in the WarnerMedia portfolio — literally, likening the premium programmer to the Tiffany luxury jewelry and goods retailer. “HBO is a very unique brand,” Stephenson said. “I mean what I said, it is the Tiffany’s of media and entertainment.”

Observers immediately pointed out that Walmart, with $486 billion in revenue last year, is 100 times more massive than the high-end Tiffany & Co., which reported $4.2 billion in sales for 2017. Meanwhile, Walmart itself is working up plans to launch a subscription VOD service.

Of course, Stephenson meant to imply that HBO is the creme de la creme of original programming, not necessarily that it’s a far smaller business than Netflix, even if that’s what his analogy explicitly connoted. The exec’s Netflix-Walmart/HBO-Tiffany comparison also rings hollow given that Netflix outscored HBO on this year’s Primetime Emmy Awards nominations for the first time —  with 112 for Netflix and 108 for HBO.

Stephenson said AT&T will “step up” the investment in content at HBO, which spends around $2 billion annually on content. However, he added, “We’re not talking about Netflix-like investments.”

WarnerMedia CEO Stankey and HBO chief Richard Plepler have been tasked with growing HBO’s content output “to make sure we have a more robust cycle of content coming throughout the year – and throughout the week,” Stephenson said.

HBO needs a “more fulsome lineup and schedule,” according to Stephenson. For example, he said, subscribers sign up for HBO to watch “Game of Thrones” and then leave when the latest season ends. The new content strategy for HBO is “more about filling out the schedule,” Stephenson said.

Asked about the Justice Department’s appeal of the ruling in the antitrust case that gave the go-ahead to AT&T to proceed with the Time Warner takeover, Stephenson noted that the burden of proof is on the DOJ to demonstrate that the judge got it wrong,

“We feel very good where we stand on appeal. The deal is closed. The integration is going quite well,” Stephenson said. “The teams are spending zero effort thinking about the appeal,” he added, though he did say the Justice Department litigation has been a distraction. The AT&T chief said he expects the DOJ appeal in the case to wrap up in January or February 2019.

While AT&T’s entertainment group, which includes DirecTV and broadband, has been in decline because of satellite-TV subscriber losses, the company’s newly launched WatchTV over-the-top business is profitable, according to Stephenson. In July, AT&T raised the price of DirecTV Now streaming plans by $5 per month, and so far in Q3 “we’ve not seen the deterioration of subscribers we thought we would,” Stephenson said.

In 2019, WarnerMedia’s revenue is projected to grow along with AT&T’s wireless business, Stephenson said. If the AT&T entertainment group is at least flat, he said that even at that “low watermark” the company will have comfortable cash-flow levels to pay down debt it amassed through the Time Warner deal.

AT&T continues to expect its net-debt-to-adjusted-EBITDA ratio to be in the 2.5X range by the end of 2019, according to Stephenson. For full-year 2018, the company expects to hit more than $21 billion in free cash flow and begin 2019 with a baseline of $25 billion in free cash flow.

Stephenson said there are still substantial overhead costs at WarnerMedia that the company can eliminate. Those are functions that can be integrated across HBO, Turner and Warner Bros. in areas including procurement, finance and accounting, the AT&T CEO said. AT&T has said it expects to see $1.5 billion in cost synergies and $1 billion in revenue synergies from the Time Warner acquisition within the next three years.

“We’ve told Stankey, you take that and redeploy that in media and entertainment content,” Stephenson said.

More Biz

  • Stephen Colbert Julia Louis-Dreyfus

    Julia Louis-Dreyfus Talks 'Seinfeld,' 'Sexist' Environment at 'SNL' in Q&A With Stephen Colbert

    Stephen Colbert and Julia Louis-Dreyfus swapped stories about “Saturday Night Live,” Northwestern University, “Seinfeld” and the possibility of running for office during a Q&A held Saturday as part of Montclair Film Festival’s annual “Evening with Stephen Colbert” fundraiser. Colbert, a Montclair resident, has long been a booster of the festival, which is going into its [...]

  • 2019 Kennedy Center Honoree singer Linda

    Linda Ronstadt to Mike Pompeo: Stop 'Enabling' Donald Trump

    WASHINGTON, D.C. — Linda Ronstadt, one of this year’s Kennedy Center Honorees, had sharp words for Secretary of State Mike Pompeo on Saturday night during a State Department reception for the Kennedy Center kudos. Ronstadt and Pompeo faced off in the U.S. State Department’s ornate diplomatic greeting rooms at the traditional event that precedes Sunday’s [...]

  • pharrell brain child show

    'Blurred Lines' Flares Up Again - Marvin Gaye Family Claims Pharrell Perjured Himself

    Like a zombie that just won’t stay dead, the “Blurred Lines” case keeps coming back. While the 2015 verdict, in which Pharrell Williams, Robin Thicke and the song’s publisher were ordered to pay nearly $5 million to Marvin Gaye’s family for infringing upon the late singer’s 1977 hit “Got to Give It Up,” was basically [...]

  • WGA Agency Packaging Fight Placeholder Writer

    WGA-Agency Showdown: Role of Showrunners at Heart of Legal Arguments

    The Los Angeles courtroom of U.S. District Judge Andre Birotte was packed with well-dressed lawyers on Friday morning, eager to watch a high-stakes brawl between Hollywood’s largest talent agencies and the Writers Guild of America. Birotte allowed only four lawyers from each side to sit at each table, leaving the vast majority of the attorneys [...]

  • 700700 + Ted Turner Dedication. December

    Ted Turner Tributes Established With WarnerMedia Gift to University of Georgia

    WarnerMedia has established a scholarship, internship program and exhibition hall at the University of Georgia to be named after maverick media mogul Ted Turner. The company has gifted $550,000 to the university to create the Ted Turner Scholarship Fund, for students attending the school’s Grady College of Journalism and Mass Communication, which is also the [...]

  • WGA Agents Contract Tug of War

    Judge Leans Toward Agencies' Position in Writers Guild Antitrust Suit

    A federal judge indicated on Friday that he will allow the three major agencies to pursue their antitrust lawsuit against the Writers Guild of America. The WGA has urged U.S. District Judge Andre Birotte to throw out the suit, arguing that its actions in its ongoing battle with the agencies are protected under antitrust law. [...]

  • Keli LeeStep Up Women Network 9th

    Keli Lee Exits ABC Studios International as Disney Considers Division's Fate (EXCLUSIVE)

    ABC veteran Keli Lee has left the international arm of ABC Studios as Disney considers the future of the London-based content unit, Variety has learned. Sources said Disney has told the creative community that there “has been a re-evaluation of ABC Studios International” and that it is re-assessing “the creative direction” of the business. There [...]

More From Our Brands

Access exclusive content