Blackouts Expected to Lead to 300,000 Sub Losses at AT&T

CFO said Apple’s streaming announcement highlights value of HBO
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After lengthy blackouts of CBS and Nexstar stations, plus the impact of price increases, AT&T expects to lose an additional 300,000 to 350,000 subscribers in the quarter, CFO John Stephens said.

John Stephens

John Stephens

Speaking at the Bank of America Merrill Lynch Media, Communications and Entertainment Conference on Wednesday, Stephens talked about the decision to let some programmers go dark on its DirecTV, Uverse and other TV services. 

“We had to make some tough decisions on those retrans providers, when some of the requests for increases were just no economically sound. And we decided that we would not accept them and then we had to hold our ground,” he said.

The blackouts ended when “rates got to a reasonable level,” Stephens said.

Earlier this week, the Walt Disney Co. began warning AT&T subscribers that a blackout of channels including ABC and ESPN loomed.

Stephens noted that despite the lost subscribers, AT&T has been exceeding its earnings targets and will strive to meet or exceed its EBITDA commitments.

On Monday AT&T got a letter from hedge fund Elliott Management which said it had taken a $3.2 billion stake in AT&T. The letter was critical of AT&T acquisition strategy, its collection of assets and overall management.

Asked about the letter, Stephens stuck close to the company’s earlier statements about Elliott’s criticism. “Management and the board feels strongly that our current strategies are the best way to create value for our shareholders,” he said.

Among the assets Elliott said AT&T should consider divesting was DirecTV, which was losing subscribers even before the blackouts.

But Stephens said that the logical buyer for DirecTV would be the other major satellite company, Dish, and the government wasn’t going to let that happen.

“We understand the industrial logic, but quite frankly it’s been tried and has been rejected,” he said.

It seemed the company’s regional sports networks were more likely to go on the block. “We’re continuing to look at the RSNs,” he said. “Regional sports services have garnered good value in other transactions.”

HBO Max

Bank of America Merrill Lynch analyst asked Stephens for a preview of what AT&T will say about its HBO Max streaming service. AT&T’s WarnerMedia will be presenting details about the service on Oct. 29 in Los Angeles.

Stephens declined to share additional details about HBO Max, saying that the presentation will focus on WarnerMedia’s talent and include financial implications of launching the service.

Asked for a reaction to Apple’s announcement that Apple TV+ will launch Nov. 10 and cost just $4.99 a month, Stephens was asked for his reaction to Apple’s planes.

“I'll leave others to evaluate what you heard yesterday from Apple. But for me it reinforces, boy, we've got really quality assets and really quality capabilities that others just don't have -- don't have at their disposal,” he said.

“The first thing to remember is, we also start with something called HBO. And so, we only have a 40-year head start with a quality product that is the premium of premium. So, we feel really good about that,” Stephens said.

Stephens added that AT&T’s Warner Brothers studios created a few of the shows Apple TV+ will be streaming. “I'm sure those are pretty good shows because the folks over at Warner Brothers do great work,” he said.

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