Where does AT&T -- and other diversified communications/media companies -- go in future?
Randall Stephenson’s departure as CEO of AT&T, after recent years of big entertainment/TV acquisitions, would seem to be a good place to start.
History is littered with troubled deals of horizontal expansion from one’s existing businesses. Start with Time Warner buying AOL over two decades ago.
Last year, 21st Century Fox figured it could be everything to everyone, and pulled back, selling half of its businesses to Walt Disney.
You might think Comcast Corp -- nine years after buying NBCUniversal was approved -- has always been successful. But it wasn’t always easy. Comcast, as a cable distribution company, now an overall video, mobile and phone communications company, had to figure out a way to work with various TV/movie-centric businesses. That's not always easy fit from a “creative” content point of view, especially with a basic communication/distribution operation.
Walt Disney -- for all its acquisitions over the years, Pixar, Marvel, Lucasfilm and half of Fox TV/movie business -- shies away from horizontal moves. Specifically, that means not getting into the traditional pay TV distribution game.
Now, of course, digital D2C businesses with Disney+, ESPN+ and Hulu seem to be the right moves.
AT&T is still trying to determine that part. But it first needs to figure out some of its basic “pipes” issues, starting with where DirecTV as a brand is going, which continues to have drastic subscriber losses.
One key indication is the company said DirecTV was going to stop all broad-based brand advertising -- only focusing on marketing to rural or suburban areas.
In turn, AT&T TV, its new internet-based contract-based pay TV service, (one that competes more with traditional cable, satellite, telco operators) hasn’t done much. Neither has AT&T TV Now, the former service DirecTV Now, a streaming non-contract pay TV service, which competes with companies like Sling TV, Hulu + Live TV, among others.
The jury is still out over WarnerMedia -- its TV networks (Turner and HBO) and its movie studio. The big bet is its premium video streaming platform HBO Max, which launches in May.
The positive is HBO continues to have a strong brand appeal for subscribers.
But some analysts worry that lumping in all WarnerMedia content into one service -- HBO programming, Warner Bros. movies/TV shows, and other ad-supported content from Turner -- might dilute the brand.
Strong points here are that HBO Max is claiming a massive library of product, perhaps of bigger value to consumers. Bottom line is its higher price, $14.99 a month, double that of Disney+ ($6.99/month) and triple Apple TV+ ($4.99/month).
More strengths: With near-term streaming spikes due to Covid-19, HBO Max enters a world hungry for more TV/video options.
Add in a lesser-noticed story: AT&T’s growing Xandr, its advanced advertising business, continues to find strong growth.
But don't forget the debt. Lots of it. Some $150 billion now resulting from big deals in acquiring TimeWarner and DirecTV. Right now, AT&T has a lot of moving pieces. -- not all going in the same direction.