In his first AT&T earnings call after the closing of the Time Warner acquisition, WarnerMedia chief John Stankey dismissed reports about his tough-love greeting to HBO employees at a town hall meeting.

“I would tell you I don’t think it fairly characterized what we are about,” he said of reports in the New York Times and Recode that quoted him saying 2018 would be a “tough year” of grueling work that he likened to childbirth. Asked by Wall Street analysts to offer guidance on HBO content spending, he declined to name a number but said levels of investment would definitely rise.


“What we know about this space is it requires scale,” he said. “We’ve got to get the formula right.” While HBO would not match the $8 billion and up being spent by Netflix, he said it would come up from its current level, which is less than one-third of that mark.

“We will make decisions to reinvest some of the efficiencies” from the Time Warner acquisition, Stankey said, which are projected to add up to $1 billion by 2021 (another $1.5 billion in cost savings are also expected).

As to what kind of programming those funds would support, Stankey said HBO boss Richard Plepler and his team have identified “tremendous projects already in the funnel they have not been in a position to say yes to.” He did not offer specifics as to genre or talent, but described them as material that has “already scoped out that we already have rights for.” These “very high-profile projects,” he said, will bring down rates of churn and keep subscribers from “jumping in and out” based on programming flow.

Later, asked again about the competitive landscape, he said, “I don’t worry about scale in content. … I think the race is on for scaling customer bases, not scale on media content. We’re in good shape with our ability to scale media content.”

Another key dimension to HBO, and one analysts asked about, is how it is marketed and distributed. HBO Now, the stand-alone OTT service, has shown some growth but still comes in for criticism over its $15-a-month price point, which is far above that of Netflix. Stankey did not acknowledge one analyst’s repeated questions about pricing strategy.

(Photo by Jose Luis Magana/AP/REX/Shutterstock)

Randall Stephenson, CEO of AT&T, reinforced Stankey’s outlook on reinvesting some of the synergies into HBO and other assets. The call, which ran unusually long at nearly 90 minutes, also offered the company leader a chance to muse on the long road toward closing the $85 billion Time Warner deal — a process that remains under a cloud given the government’s appeal of a federal judge’s decision backing the merger.

“We find it fascinating,” he said of the frenzy of M&A activity that followed the initial proposal for AT&T-Time Warner to get together. “We expected some time back that this would happen. It’s hard to believe, but it was back in 2016 was when we did this deal.”

Anticipating the need to consolidate, Stephenson recalled, “we did a scan of what opportunities were out there. Time Warner jumped out. … Everything else was a distant second.” Even though “the last few months have been a distraction, make no mistake about it,” Stephenson expressed pride in sticking to the plan to shepherd the deal through — his words carrying new resonance given the appellate court challenge facing the company over the months to come.

“We could not be happier that we moved first,” the CEO said. “When you move first, you rarely regret it as you see an industry trend happen.”