By Joe Flint
AT&T Inc.'s chief operating officer defended the company's
strategy in the media business and said it doesn't plan to sell its
DirecTV unit, viewing the satellite TV provider as central to its
ambitions in streaming video.
In an interview, John Stankey said, "DirecTV is an important
part of what we're going to be doing going forward."
The Wall Street Journal reported last week that AT&T was
examining whether to part ways with DirecTV, and that the company
had considered options such as a sale or spinoff.
Mr. Stankey said AT&T has studied its options for DirecTV as
part of broader portfolio reviews. "We're constantly looking at the
portfolio," he said. "That's the normal course of business and it's
not unique to DirecTV."
Elliott Management Corp., an activist investment firm that
disclosed a significant stake in AT&T this month, has called on
the company to shed assets and reassess its plans to transform into
an entertainment colossus. AT&T bought DirecTV for $49 billion
in 2015 and last year purchased Time Warner Inc. in a deal valued
at $81 billion. Mr. Stankey said asset reviews have been done
before Elliott went public with its concerns.
Although DirecTV has hemorrhaged subscribers as consumers cancel
their TV service, Mr. Stankey said it would play a significant role
when the company launches a subscription video-streaming product
next year that brings together content from its WarnerMedia unit,
which includes HBO and Warner Bros. AT&T is looking for
traditional pay-TV distributors to be involved in rolling out the
He also said DirecTV is an important part of the company's
advertising business, given the data it provides to allow for more
Mr. Stankey, 56 years old, was elevated earlier this month to a
newly created chief operating officer role at AT&T, putting him
in line to succeed Chief Executive Randall Stephenson.
Mr. Stankey continues to serve as chief of the WarnerMedia
division and said there are no plans for him to give up the role.
"I'm not looking to find my successor right at the moment," he
Acquiring DirecTV instantly made AT&T the largest pay-TV
distributor, but it has been ravaged by service cancellations.
AT&T had 23 million U.S. pay-TV customers at the end of the
second quarter, some three million fewer than at the time of the
Mr. Stankey attributed some of DirecTV's woes to its inability
to offer all subscribers service bundles that include high-speed
internet access, unlike cable operators such as Comcast Corp. which
offer TV, voice and internet bundles.
"Where we've built better broadband, the business is performing
just fine," Mr. Stankey said.
One of Mr. Stankey's biggest priorities is HBO Max, the new
streaming service that will compete with Netflix Inc. and other
offerings in the works from Walt Disney Co., Comcast and Apple
Mr. Stankey declined to comment on the price of HBO Max. It is
expected to be higher than $15 a month, which is what HBO costs,
people familiar with the matter have said. That would be more
expensive than Netflix, whose most popular plan is $13 a month.
Disney's Disney+ is being sold for $6.99 a month while Apple's
offering is $4.99.
"Higher quality should warrant a slightly higher price," Mr.
Stankey said. HBO Max will include all of HBO's programming as well
as original and library content.
Mr. Stankey said companies are setting prices according to their
differing business models. Apple can set a low price, in part
because it is looking to use video "to sell a lot of hardware" at a
high profit margin, he said. Apple TV+ will come free for a year
with the purchase of a new iPhone, iPad or iMac.
Disney likely wants to keep its price low, Mr. Stankey said,
because the monthly cable bills consumers pay already reflect
substantial charges for Disney's channels, including ESPN. "I think
that's just natural for their business model," he said.
Representatives of Apple and Disney declined to comment.
HBO, he said, is already a "a premium discretionary product that
over 30 million households say they want at $15 a month."
After AT&T's acquisition of Time Warner, Mr. Stankey
combined the HBO and Turner cable units, leading to the departure
of the top executives in each division. The Warner Bros. movie and
television studio is now more closely aligned with the rest of the
company than in the past.
"Did we have three of everything when we closed this
transaction? We did. Can you be successful in media as three
subscale businesses moving forward when all these companies are
consolidating to get scale and play at scale? I don't think so,"
Mr. Stankey said.
Some of the people who left, Mr. Stankey said, could have
remained if they wanted. "Sometimes you want the person to stay,
but they look at it and say, 'this is not my cup of tea,'" Mr.
Stankey said, or "'my sandbox has changed.'"
Mr. Stankey said his leadership team, including WarnerMedia
Entertainment Chairman Robert Greenblatt and Warner Bros. Chief
Executive Ann Sarnoff, "subscribes to the direction we're headed
and are energized about it."
Mr. Stankey said he values input from his people, disputing
criticism from some former Time Warner executives. "We got to the
restructuring of this business through the input of the people who
ultimately wanted to play," he said. "Now there were some people
who didn't really want to play and maybe they didn't get a lot of
--Drew FitzGerald contributed to this article.
Write to Joe Flint at firstname.lastname@example.org
(END) Dow Jones Newswires
September 24, 2019 16:23 ET (20:23 GMT)
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