AT&T Plans Three Streaming Options in Its War With Netflix. The telecom giant provided the latest details as part of a presentation to analysts and investors, who are looking for signs that the company can get a payoff from its $85 billion Time Warner deal. In September, Stephenson said he planned to use Time Warner’s HBO as the anchor for the new online video service and surround it with Warner Bros. shows and films — and possibly sports programming.
AT&T will have plenty of competition. Walt Disney Co. is introducing an online service with Star Wars and Marvel shows around the same time, and Jeffrey Katzenberg has a new short-form video project in the works. But AT&T Chief Executive Officer Randall Stephenson has to find new ways to retain TV viewers: His DirecTV Now online streaming service is going to lose subscribers this quarter and next, AT&T said.
Market Confusion?. During a question-and-answer session with analyst, AT&T media chief John Stankey tried to allay concerns that the company’s various video options would confuse customers. In addition to the upcoming streaming service, the company has multiple tiers of DirecTV Now.
To narrow its focus, WarnerMedia — the new name of Time Warner — has already started to reduce the number of niche consumer subscription services, such as FilmStruck. He said the company is moving toward a more “unified library” of content. This centralized system will help serve both the upcoming video-on-demand service as well as play an important role in beefing up the DirecTV Now offerings.
Stankey also suggested that rival video-on-demand services like Netflix and Amazon are facing shorter-length content licenses — in other words, they won’t have shows and movies locked down for as long. As they lose the rights to well-known entertainment properties, they’re in a race to create more original content.
More News and Analysis On AT&T Inc.
As the lines between entertainment and communications gradually blur, AT&T Inc. (NYSE:T) continues to reinvent itself in order to evolve according to the changing consumer preferences. The company has recently offered some key insights into its corporate strategy as to how it plans to better serve customers through an integrated product portfolio, while maintaining a leading position in both these market categories.
AT&T completed the acquisition of Time Warner in June 2018 to form a new business division titled WarnerMedia. The company realized that vertical merger was the perfect way to move forward as neither a core communications firm could rely exclusively on content, nor a media firm could solely depend on wholesale distribution models to sustain in a dynamic environment.
AT&T expects to achieve synergies to the tune of $2.5 billion by 2021 from the WarnerMedia assets. These include $1.5 billion from cost synergies related to efficiencies in marketing and procurement and corporate overhead, and $1 billion revenue synergies from additional sales, lower subscriber churn and higher advertising opportunities.
Strengthening of Balance Sheet Position. The company expects to strengthen its balance sheet position by significantly lowering debt burden by utilizing its free cash flow. AT&T intends to lower net-debt-to-adjusted-EBITDA ratio from about 2.8x by 2018-end to 2.5x in 2019. This would involve a debt reduction of $18 billion to $20 billion by next year.
AT&T expects to achieve this milestone by utilizing about $12 billion in free cash flow, with the remainder being resourced through cash generated from real estate sale-lease backs, divesture of non-core assets and other working capital initiatives.
Ramping Up FirstNet Program, 5G Focus. With the bulk of revenues coming from the Mobility business, AT&T aims to ramp up the FirstNet deployment while focusing on 5G technology to retain its leading position in this market.
As part of the 25-year contract, FirstNet will provide AT&T with a swath of 20 MHz of spectrum in the 700 MHz frequency band for the entire duration. AT&T will also be given success-based payments of $6.5 billion over the next five years to design and build the network.
The company is expected to spend around $40 billion over the life of the contract to build, deploy, operate and maintain the network. AT&T has projected that this contract will create more than 10,000 jobs over the next two years, offering a significant boost to its profile.
As part of its 5G deployment in a dozen cities in 2018, AT&T aims to launch mobile 5G service in certain areas of five cities — Houston, Jacksonville, Louisville, New Orleans and San Antonio. These add to its previously announced seven cities of Atlanta, Charlotte, Dallas, Indianapolis, Oklahoma City, Raleigh and Waco.
AT&T is further planning to bring mobile 5G service in parts of Las Vegas, Los Angeles, Nashville, Orlando, San Diego, San Francisco and San Jose in early 2019 to take the tally to 19 cities and will expand thereafter. Notably, AT&T’s 5G deployment will entail utilization of millimeter wave spectrum to deploy 5G in pockets of dense. In parts of urban, suburban and rural areas, the company aims to deploy 5G on its mid and low-band spectrum holdings.
In order to generate incremental revenues, AT&T plans to introduce subscription video on demand (SVOD) service in WarnerMedia in 2019 along with an advertising-supported video on demand service in the near future.
With a three-tier service, including an entry-level movie-focused package, a premium service with original programming and blockbuster movies, and a bundled service package with content from the first two along with an extensive library of licensed content, SVOD is likely to complement WarnerMedia adeptly. This in turn is likely to expand its customer base and open up other avenues to monetize content by leveraging data and analytics to create focused advertising messages.