Speaking Wednesday morning at the J.P. Morgan Global Technology, Media and Communications conference, Stankey talked up the prospects for HBO Max subscription service debuting at a time when Americans are home-bound because of the coronavirus pandemic. He also reiterated the intention to further expand AT&T and WarnerMedia’s content strategy to incorporate advertising-supported content as well as making that platform available to other content owners in some form of revenue-share agreement.
“Our TV businesses and our SVOD businesses start to become one as we get out over the next couple of years,” Stankey said during the half-hour Q&A with J.P. Morgan’s Phil Cusick. “We’re in a very natural place for that to occur.”
The AT&T TV streaming channel package, which serves as the operator’s DirecTV replacement going forward, is a good example of a complementary service for the HBO Max foundation that will expand AT&T’s reach, according to Stankey.
“As the customer base of (HBO Max) grows, it becomes the scalable distribution element within AT&T,” he said. “That becomes the lead basis of entertainment and how we get in to most U.S. households.”
Stankey is set to take the reins of AT&T as CEO on July 1, after a 35-year career with the telco giant where he most recently served as CEO of WarnerMedia and president and chief operating officer of AT&T. He praised his longtime mentor, current CEO Randall Stephenson for having “done a great job of bringing together a lot of tools in the toolbox” through acquisitions of DirecTV in 2015 and Time Warner in 2018, among others.
Now Stankey’s successor’s focus is “about making those tools work well effectively, repositioning the business and refocusing it on the best of what we have. Part of that is getting focused on where there’s growth in the business: broadband connectivity and software-based entertainment distribution,” he said.
The coronavirus lockdown has not dampened AT&T’s enthusiasm for getting HBO Max off the ground. Spending on original production for the service has temporarily dropped because of the filming blackout, he said.
“Our customer acquisition push is going to be as aggressive as it was prior to the epidemic,” Stankey said. “It’s an unfortunate time for launching a production (but) this helps from the perspective that people are looking for things to do inside their homes right now. I suspect (interest in HBO Max) might be at a higher level that we’d normally expect in a distracted society.”
Stankey said AT&T has focused on ensuring broad distribution for the HBO Max app across MVPDs and digital distributors. The company expects to unveil a number of distribution pacts prior to the launch date, although Stankey noted that Amazon Fire may not be among them.
Down the road, Stankey indicated AT&T is looking to open its platform and Xander advanced advertising sales unit to other content owners in a manner where “the splits aren’t egregious.” More content will only make HBO Max more attractive to consumers and to AT&T, which is hoping that subscription and ad-supported content platforms will help generate more AT&T wireless and high-speed data subscriptions.
“A rising tide will lift all boats,” he said. “It’ll be more powerful.”
Among other highlights from the session:
** Stankey said DirecTV and WarnerMedia are seeing “probably a 20% decline in aggregate” in advertising sales at present, given the economic shocks caused by stay-at-home orders.
** Stankey’s macro-level view of TV being in a “transitional moment” from linear to on-demand streaming doesn’t bode well for DirecTV. He suggested that the traditional MVPD bundle that has powered entertainment earnings will survive as a vehicle for live sports, news and other events. “The most survivable element of the live linear construct is going to be sports content,” he said.
** Newly appointed WarnerMedia CEO Jason Kilar is the right fit for WarnerMedia because of his deep background in digital media. “He’s been through these battles,” Stankey said of the Hulu and Amazon alum. Kilar’s understanding of the technology behind digital advertising and content distribution makes him a leader with the kind of expertise that will “quicken our execution.”