How AT&T May Become a Winner in the Streaming Wars
After a topsy-turvy week, the thought occurred to me throughout AT&T’s investor name on Thursday: What if John Stankey wound up on the profitable facet of the streaming wars?
Netflix took a nosedive on Tuesday with an earnings report that proved that it couldn’t droop the legislation of gravity endlessly. The regular upward climb of Netflix subscriber good points needed to cease someday, and that someday was Q1 2022.
The jolt that the information of six-figure losses in Q1 and a projected seven-figure loss for Q2 packed a wallop on Netflix inventory worth. It additionally dealt a blow to the Hollywood psyche in regards to the long-term promise of streaming, harking back to how the earth quaked in August 2015 when then-Disney CEO Bob Iger acknowledged that even the mighty ESPN had confronted “some subscriber losses.”
That turned the second that Hollywood begrudgingly needed to acknowledge that cord-cutting was an actual menace. Will Netflix’s large miss grow to be enshrined finally because the second the content material bubble burst? Solely time and content material spend disclosures will inform.
The sense of aid within the AT&T CEO’s voice got here in crystal clear even by means of the tinny webcast audio. The telco large is glad to be seeing WarnerMedia within the rear-view mirror after closing the spinoff transaction with Discovery on April 8.
AT&T’s Q1 outcomes message to Wall Road analysts took inspiration from the Shakers: ‘Tis a present to be easy.
Stankey and AT&T chief monetary officer Pascal Desroches used the phrases “easy” and “simplified” at least eight instances throughout the 70-minute name to explain the new-and-improved AT&T steadiness sheet. The corporate’s new development focus even comes with useful built-in alliteration: 5G and fiber.
It’s not onerous to know why Stankey sounded joyful to be speaking about its direct stewardship of Warner Bros., HBO and the Turner networks prior to now tense. With the streaming wars now being synonymous with the spending wars, AT&T has simply offloaded $55 billion in debt and a metric ton of aggressive pressures and headwinds in media and leisure. And it acquired a boatload of money in return, plus a majority of the fairness within the successor firm.
The duty for funding HBO Max’s development is now off of AT&T’s books (largely). If David Zaslav, Warner Bros. Discovery’s intrepid new chief, manages to make the enlarged firm work on a world scale, upside will circulation to AT&T shareholders. And if not, Stankey, who’s nothing if not an skilled dealmaker, made one of the best of a nasty scenario to assist mitigate the ache for AT&T shareholders after the telco’s wild trip in media.
“With the completion of the WarnerMedia transaction, AT&T obtained $40.4 billion in money and WarnerMedia’s retention of sure present debt. Moreover, AT&T shareholders obtained 1.7 billion shares of Warner Bros. Discovery, representing 71% of the brand new firm,” Stankey intoned. “This transaction significantly strengthens our steadiness sheet and gives us with monetary flexibility going ahead. We now have a simplified capital allocation framework.”
Certainly, AT&T created a smoking crater in its steadiness sheet with ill-timed purchases of DirecTV (for $48 billion) in 2015 and Time Warner (for $84.5 billion) in 2018. There’s no totaling the misplaced alternative prices for each side of the AT&T/TW merger for the greater than 5 years of sad marriage that started with the preliminary acquisition settlement in October 2016. (The ultimate pricetag for AT&T additionally has to incorporate the untold tens of millions it spent to prevail towards the Justice Division’s quixotic antitrust lawsuit.)
On Thursday, Stankey presided over the disclosure of HBO Max’s subscriber figures for the final time — they usually had been credible with a 3 million achieve over This fall reaching a 76.8 million whole worldwide. Hours after he spoke, David Zaslav, the brand new chief of Warner Bros. Discovery, pulled the plug on area of interest streamer CNN+ lower than 30 days after it was launched within the waning weeks of the earlier WarnerMedia regime’s tenure. Chalk it as much as merger mania.
HBO Max’s numbers regarded downright robust in comparison with Netflix’s droop. So why did the AT&T chief sound even happier to be speaking in granular phrases relating to AT&T’s standing in telco and wi-fi “circulation share” and the like? The reply appears fairly easy.