Commentary

AT&T Sees Investment In HBO As Profitable

Santa Barbara, Calif. -- If Netflix is Walmart, is HBO then Tiffany’s?

Perhaps. But this is not a slight, says Randall Stephenson, chairman-CEO, AT&T, speaking at its AT&T Relevance Conference here. Stephenson was referencing a remark he made recently about the future of HBO. It may have been a bit controversial to some.

Stephenson explained these two businesses are different in terms of scale -- one isn’t better than the other. Walmart is a place you can find everything. Netflix is like that as well, with a wide variety of content. But HBO is different, focusing on more premium video scripted and documentary series.

“We are not trying to make HBO into Netflix,” he says. But this doesn’t mean HBO won’t benefit from more resources -- getting bigger for consumers. “We want them to be engaged year-round.” he says. “Over time, capital gets reallocated. .. I will be disappointed if three years from now we are not investing more in HBO.”

HBO may get more resources from other areas in the new WarnerMedia, possibly from other TV businesses like ad-supported TV group Turner.

And what about Turner’s CNN? It’s hugely important, and not just for freedom of the press issues. “Live premium content is a killer app,” says Stephenson.

As part of a broader plan for AT&T and its businesses, much of this growth will come with new 5G technology, which provides instant access to content -- without latency issues.

Stephenson believes all this will save consumers time. And what will they do with that savings?  Spend more time with the media. That’s good for AT&T.

Perhaps Stephenson is also recognizing that Netflix is a different digital video platform at this point in its business cycle -- one with a massive footprint of nearly 60 million digital U.S. subscribers. No other OTT competitor is close to that number.

Other big traditional media companies looking to take on Netflix see this differently.

For example, Bob Iger, chairman-CEO, Walt Disney, has said the company wants to take on Netflix content-wise. That includes TV/movie inventory that comes from buying half of 21st-Century Fox's businesses. He says the direct-to-consumer (DTC) business is “the biggest priority of the company.”

At some point, drilling down, Disney will need to make some key strategic decisions about positioning this forthcoming entertainment DTC video platform. If not Walmart or Tiffany's, what?

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