In an online appearance Friday at the Morgan Stanley European Media, Tech and Telecom Conference, he complimented WarnerMedia CEO Jason Kilar and his staff for “being collaborative and thinking differently to do something for the first time.”
The release, which will be free for streaming subscribers on Christmas Day at the same time it hits the theaters able to stay open despite COVID-19, arrives at “a really challenging time” for exhibitors, Stephens said. “They’re really starved for great content.” For WarnerMedia and AT&T, he continued, the arrangement “provides us a great opportunity to showcase HBO Max and to have a really elite invitation for people to come and not only use HBO Max to watch Wonder Woman 1984, but then to realize the great depth and quality” of the service.
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As the last of the billion-dollar challengers to Netflix to launch during a seven-month stretch in 2019 and 2020, HBO Max has not been an immediate triumph, though executives say it is meeting initial targets. One hurdle has been distribution — about 8.6 million accounts have been activated, but another 28.7 million have not switched on their no-cost HBO Max access. Third-party distribution has also been a bottleneck, though the company reached a deal with Amazon Fire TV on Monday. Roku, which has 46 million active accounts, is another top-tier streaming venue where HBO Max is not yet available.
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Stephens, who this week announced his plan to retire in early 2021, said the company is “really pleased” to have sealed a deal with Amazon. Moderator Simon Flannery, an analyst with Morgan Stanley, did not ask about Roku.
The 40-minute conversation touched on a number of other areas, including the international rollout of HBO Max, the state of TV advertising and AT&T’s view of linear networks like TNT and CNN.
Linear subscription and advertising revenue continues to be “important to us,” Stephens said, noting sports rights and CNN’s election-year viewership, which has “knocked it out of the park.” Because those linear operations are “good cash flow generators,” Stephens implied they are not going to change anytime soon, despite ongoing M&A speculation about them amid pay-TV cord-cutting. “They fit well and give us scale within this piece of the industry, so we feel good about having them,” he added.
The company, which has shed assets over the past two years like Puerto Rico operations, ownership of its New York City headquarters building and a 10% stake in Hulu, continues to identify other things to sell. Flannery did not ask Stephens about DirecTV, which is being explored as a major item to move off the balance sheet. But the CFO maintained that the company’s debt load is less of a concern than many investors make it out to be. The company reported $149 billion in net debt as of September 30, down from $180 billion when the Time Warner acquisition closed in June 2018.
Stephens called AT&T’s debt obligations through the end of the decade “a very manageable, very easily dealt-with situation.” Interest rates on long-term debt remain “really low,” he noted. “On the debt metrics, it’s amazing, if you compare us to some of the others in the industry, in the cable industry or the entertainment industry, you’ll find that ours are pretty good. They compare pretty well because of all the things we’ve done this year to come through in this difficult pandemic cycle. … We’re in better shape than many of the competitors in the industry today. I don’t think people have recognized that yet.”
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