Finance

AT&T's Stephenson: Time Warner Brings Speed, Innovation

AT&T chief says content arm can beef up DirecTV Now, mobile offerings 10/24/2016 10:27 AM Eastern

AT&T chairman and CEO Randall Stephenson had a simple answer for analysts wondering why it decided to spend more than $100 billion for Time Warner Inc.: speed and innovation.

 

On a conference call with analysts to discuss the deal that was announced Saturday, Stephenson said that soon after AT&T closed on its $48.5 billion acquisition of satellite TV distributor DirecTV last year, it realized that consumer video consumption was trending toward mobile devices. Although AT&T already had a massive wireless business, buying DirecTV accelerated the time it took to get mobile video rights.  And now with Time Warner’s massive content assets – it owns Warner Bros. Entertainment, home of Warner Bros. Pictures and Warner Bros. Television Group; and a stable of pay TV networks including CNN, TNT and TBS – that process speeds up even more.

 

“There are a lot of things we aspire to do in this platform,” Stephenson said. “As you begin to think how you share content, clipping content you’re watching and sharing with your friends via messaging or via social media; we know our customers are really demanding that. Trying to develop those types of capabilities with the current content providers is proving difficult. It’s arm’s-length negotiations and people are obviously very protective of their content. So it’s just really, really hard to get those types of innovations and iterations on content done.”

 

But owning a top programmer can clear the path for those deals, he added 

 

“Now in these OTT environments and platforms we can begin to innovate our content much quicker; we’re under the same umbrella and same ownership structure, we can get past a lot of these content rights and move fast,” Stepheson said. “We are both convinced as we innovate in this way and as we accelerate the pace of this innovation, it’s going to attract others to want to do the same on these platforms.”

 

Convincing other programmers and distributors to offer more on-demand content has been a struggle for Time Warner for at least five years, company chairman and CEO Jeff Bewkes said.

 

Bewkes said Time Warner offered its full lineup on full VOD to distributors five years ago, but they were slow to pull the trigger because other programmers balked at releasing those rights. With AT&T as its new parent, Time Warner now has the backing of the largest MVPD as well as the second largest wireless service provider in the country, which could lead to more mobile content and more mobile innovation across the board.

 

DirecTV Now will be the first foray into that new era – Stephenson has repeatedly called the over-the-top service a game changer and with a November launch he will finally be able to see if consumers feel the same. The company has already done more than a dozen carriage deals for the service, which is expected to have more than 100 live and on-demand channels available.

 

AT&T has been reluctant to reveal pricing for the service, although it has said it will be competitive. On the conference call, Stephenson said there is a huge number f consumers out there that don’t have a pay TV subscription – estimates put that universe at about 20 million people – but would with more compelling pricing and packaging.

 

But to get there, AT&T will have to pass what some believe will be pretty stiff regulatory pressure for the Time Warner purchase. Large mergers are increasingly losing favor with the feds and with a new Administration expected to oversee the scrutiny – Republican presidential candidate Donald Trump already said he would block the deal and Democratic nominee Hillary Clinton has said she would favor more strict oversight – the road to approval could be rocky.

 

Stephenson said he is confident that the Time Warner deal will pass muster, because it is a classic vertical merger. The deals that have been blocked have been horizontal deals that have either removed a competitor or would have created a dominant broadband or distribution provider.

 

Stephenson added that any problems regulators would have with the Time Warner union could be remedied or addressed with conditions.

 

Bewkes, who was expected to leave after the deal is done, said on the call that he intended to stay after closing.

 

“I’m staying,” the 64-year-old executive said on the call, adding that over the succeeding years, “the next generation will be ready.”

 

Time Warner has been vertically integrated in the past – it spin off its Time Warner Cable division in 2009. But Bewkes said that decision was made because Time Warner Cable was a regional operator covering about 12% of the country.  With AT&T and its mobile efforts, it has a nearly national footprint.

 

 “The world is much different now,” Bewkes said.

 

Want to read more stories like this?
Get our Free Newsletter Here!