Stankey

AT&T’s incoming CEO John Stankey has a message for America: If you are unwilling to pay $15 a month for AT&T’s HBO Max, you have a low IQ.

Stankey made that declaration pitching the new service, set to debut in May. The fact the video platform is late to a market already crowded by Netflix, Hulu, and Disney is just part of the challenge. That $15 price point is a bigger one.

If there is any company in the telecom business that can prove consumers are sensitive to price hikes and bill shock, it is AT&T. Its frequent rate hikes for its DirecTV satellite service and various streaming TV platforms have caused a customer exodus. More than a quarter of DirecTV customers have left and, even more stunning, well over half of AT&T’s streaming TV customers have dropped the service. In late 2018, DirecTV Now (today AT&T TV Now) — AT&T’s cord cutting TV alternative, had 1.8 million customers. As of last month, that number is down to 788,000 and still falling.

AT&T has repeatedly claimed it wants to focus on “high value” customers, which may explain why it remains confident its $15/mo HBO Max service will do well, despite being the most costly streaming service in the market.

Stankey’s predecessor, Randall Stephenson, will exit as AT&T’s CEO in July. He leaves a much larger conglomerate than what he started with. AT&T has diversified from its telephone and wireless portfolio with several major acquisitions, including DirecTV — the satellite TV service, and Time Warner (Entertainment), a Hollywood studio and entertainment giant. The result is a company loaded with debt and a revolt by activist investors that question the wisdom of creating the 2010s version of AOL-Time Warner.

Elliott Management Corp., the activist investment firm that has proved itself a nuisance to the expensive dreams of several rich and powerful CEOs, does not see a viable marriage between AT&T’s profitable telecommunications business and a media and entertainment company. It took its concerns public in 2019, calling on AT&T management to get back to the basics.

Stankey’s approach seems to be a willingness to embrace the newest members of the AT&T family, for now, while also reassuring investors the shopping spree of mergers and acquisitions is over. Bloomberg News reports his views seem to have won Elliott Management over. At the same time, Stankey has to convince investors and the public he is competent at running a media company. The jury is still out on that:

Bloomberg:

At a town hall with HBO employees last year, Stankey said the network had to dramatically increase its programming output, comparing the work ahead to childbirth. Once, when a Time Warner veteran criticized an idea during a meeting, Stankey replied, “I know more about television than anybody.”

[…] But over the past two years, Stankey has tried to acclimate himself to the glitzy world of entertainment. He started watching HBO’s “Westworld” and “Succession.” He could be seen mingling with HBO talent at glitzy Manhattan premiere parties. At an industry event, he wore a pin featuring a Looney Tunes character — a WarnerMedia property — on his jacket lapel.

Most analysts are predicting this past year will be the worst yet for video customer losses, with nearly two million cable TV customers cutting the cord in 2019, up from 1.26 million in 2018. Business is even worse for satellite TV operators, which lost 1.2 million customers in 2018 and are expected to have shed another 3.25 million customers in 2019 — mostly because of mass customer defections at AT&T’s DirecTV. Altogether, over five million Americans are estimated to have cut the cord over the past year.

Investors have largely stopped worrying about video subscriber losses, and cable operators have boldly told Wall Street they have stopped chasing video customers threatening to cancel service, claiming many are no longer profitable enough to keep. Their key competitors, online streaming video services like Sling TV, AT&T TV Now, and Hulu with Live TV are also seeing subscriber gains slowing, most likely because of price increases. One analyst predicted these online cable TV replacements would add a combined 804,000 customers in 2019, less than half of the 2.3 million they added in 2018.

Cable companies seem unfazed, in part because of record-breaking gains they are expected to have made in internet and wireless customers in the last year. One analyst suggests that most of those gains are coming directly at the expense of phone companies.

Comcast and Charter are the two largest cable companies in the United States.

“Cable’s clear speed advantage in roughly half the U.S. is driving continued strong share performance,” Jayant told clients in a research note. Jayant expects some of the biggest gains will come from ex-DSL customers in Comcast and Charter Spectrum’s service areas.

Nationwide, cable operators likely added 3.1 million new broadband customers in 2019, up 15% over last year. Phone companies are predicted to have lost at least 402,000 internet customers, up from 342,000 in 2018. Most of those departing customers are not served by fiber broadband.

Both Comcast and Charter Spectrum are also successfully attracting a growing number of mobile customers, as is Altice USA. Charter and Comcast offer their broadband customers the option of signing up for wireless mobile service, powered by Verizon Wireless. Altice USA resells Sprint service at cut-rate prices.

Comcast is estimated to have added 778,000 wireless customers in 2019 and analysts predict that the company will add another 909,000 in 2020. Charter Spectrum is expected to have gained 923,000 wireless customers in 2019, with another 1.04 million likely to sign up in 2020. Altice USA’s deal with Sprint in its Cablevision/Optimum service area has already attracted about 80,000 customers, with 550,000 more likely to follow in 2020.

The Walt Disney Co., is warning AT&T U-verse, TV Now, and DirecTV customers that a blackout of Disney-owned ABC stations, ESPN, Freeform, and the Disney Channel is imminent because AT&T has not yet agreed on renewal terms.

If an agreement is not signed before the end of the month, AT&T video customers across the country are looking at a third major programming blackout this year.

“The Disney owned networks and stations have agreements in place with all of the major video providers in DirecTV and AT&T video territories, including Comcast, Verizon FiOS, Cox, Optimum, Frontier and others, and we have a strong track record of successfully reaching multi-year agreements with these and other TV providers,” the company said in a statement. “Unfortunately, so far AT&T has refused to reach a fair, market-based agreement with us, despite the fact that the terms we are seeking are in line with recent marketplace deals we have reached with other distributors.”

The last contract renewal DirecTV signed with Disney was in late 2014. It is likely AT&T’s acquisition of DirecTV allowed the company to combine its U-verse and streaming agreements with the much larger contract with the satellite TV company, with AT&T’s combined carriage agreement likely to expire on Sept. 30, 2019.

AT&T has spent much of 2019 playing hardball with programmers, willing to let their contracts expire and blackout affected stations and networks. Earlier this year, customers lost access to local TV stations owned by CBS, Nexstar, and a handful of local stations under contract with Sinclair Broadcasting. Customers also lost access to the Altitude Sports and Entertainment Network, a regional sports channel, at the end of August. In some cases, it took several weeks to reach a negotiated settlement with local station owners.

It seems likely Walt Disney will find a similar level of intransigence with AT&T’s negotiating team. AT&T is already preparing its customers for a potential protracted fight and blackout.

“We’re disappointed to see The Walt Disney Co. put their viewers into the middle of negotiations. We are on the side of consumer choice and value and want to keep Disney channels and owned-and-operated local ABC stations in eight cities in our customers’ lineups,” AT&T said in a statement. “We hope to avoid any interruption to the services some of our customers care about. Our goal is always to deliver the content our customers want at a value that also makes sense to them. We’ll continue to fight for that here and appreciate their patience while we work this matter out.”

Any blackout would impact Disney-owned and operated ABC affiliates, including:

• WABC-TV 7 New York
• KABC-TV 7 Los Angeles
• WTVD-TV 11 Raleigh-Durham, N.C.
• KGO-TV 7 San Francisco
• KTRK-TV 13 Houston
• KFSN-TV 30 Fresno, Calif.
• WLS-TV 7 Chicago
• WPVI-TV 6 Philadelphia

AT&T TV launched today in 10 U.S. cities — all within AT&T’s U-verse/fiber service areas, providing a comparable TV lineup to the DirecTV satellite service with discounts for bundling internet access.

Customers can begin signing up today for the service in Orange and Riverside, Calif., West Palm Peach, Fla., Topeka and Wichita, Kan., Springfield and St. Louis, Mo., and Corpus Christi, El Paso, and Odessa, Tex.

The service’s television lineup is closely comparable to the DirecTV satellite lineup, and AT&T intends its new streaming TV service to offer an alternative to those who do not want to install a satellite dish or deal with AT&T’s own U-verse TV. The biggest bundle discounts go to consumers who bundle internet and television service together. Video packages start at $59.99 and include a much larger lineup than AT&T’s streaming-only service targeting cord cutters — AT&T TV Now (formerly DirecTV Now).

These plans bundle television and internet from AT&T.

Customers bundling internet and TV service will find a deeply discounted 300 Mbps internet plan for $40 a month for the first year ($70 for gigabit service) and AT&T will include unlimited internet in any package bundling TV service (a $30/mo value). Installation fees are waived, but there is a $19.95 activation fee and an early termination fee of $15/mo for TV and $15/mo for internet for each month remaining on a two-year contract. AT&T TV requires a set-top box for each television and the first one is free. Each additional box is $120, payable up front or in 12 equal monthly installments of $10. The box is powered by Android TV and supports various apps and comes with a voice remote control.

Features include a 500-hour cloud DVR package, with recordings stored up to 90 days. You can record as many channels as you want at the same time, but we suspect premium movie channels may be excluded. The full lineup is available for streaming outside of your home and includes local major network affiliates in most markets. AT&T TV supports 4K streaming as well, and since AT&T is waiving its data cap for TV and broadband customers, you will not have to worry about any data caps. Up to three people can stream your TV lineup simultaneously. Keep in mind each television represents one stream.

AT&T makes life complicated for would-be customers with a panoply of confusing discounts, rebates, and savings that often expire after one year into a two-year contract. Customers should pay careful attention to the breakdown of the charges AT&T provides and mark your calendar so you are not surprised by the gradually rising bill.

Stop the Cap! put together a package to give you an idea of what to expect. We selected the “Ultimate” TV package, which includes just about every English language channel on the lineup. Mysteriously, the biggest exception is Hallmark Movies and Mysteries. Like AT&T TV Now, this channel is only available on the cheapest package, which makes no sense to us.

Let’s start with the TV package:

Note that the TV package is discounted significantly, but only for the first 12 months of your 24 month commitment. Also note the “Regional Sports Fee” which varies depending on the city. In this case, we chose Topeka, Kan. to build this package.

Premium movie channels are provided free for the first 90 days. The prices shown represent à la carte pricing. If you want these channels going forward, ask if a package price is available and bundle them for additional savings.

AT&T’s mini set-top box has been tested by DirecTV Now customers for almost a year. It earned mixed reviews and can be cumbersome. Keep in mind the first box is free, but each additional box costs $120, payable up front or in installments.

AT&T’s pricing for the first three months is very low, then higher prices kick in for the next 12 months unless you cancel those four premium movie channels, with still higher pricing during the second year of the two-year contract. AT&T makes things needlessly complicated and this explains the subscriber confusion about billing issues that is common with AT&T. But AT&T cannot be accused of not letting you know what to expect. In 2020, you could be paying $188.37 just for your TV lineup:

Next up is the internet portion of our order:

Note you get a $20 discount, but only during the first year. The fact you seem to owe nothing when placing the order does not mean the first month is free. AT&T is not sure what they will charge you because: “The monthly total on your bill may vary depending on your billing date and prorated monthly fees, based on the date of installation, that are applied to your account. Quoted prices don’t include taxes, fees, surcharges, shipping, or other charges including city video cost-recovery and Universal Services Fund fees, where applicable.” AT&T wouldn’t tell us exactly what those charges were.

Finally, AT&T includes some additional savings from various promotions, including an odd double gift card promotion awarding a total of $100 in Visa gift cards for signing up online:

The gift card promotion ends September 15, 2019 but will likely reappear. Customers have to submit their rebate request soon after service is ordered and spend the gift card(s) within six months to avoid forfeiture.

AT&T plans to roll out AT&T TV nationwide during 2020. But the company seems to be favoring markets where it already offers broadband service. It is not known if or when AT&T will introduce this streaming alternative to DirecTV in areas where other phone companies dominate. Customers do not have to use AT&T for internet access to subscribe.

CBS and AT&T have agreed to end the blackout of 26 CBS owned and operated TV stations in 17 markets including New York, Los Angeles, Chicago, Philadelphia, Dallas, San Francisco, Boston, Atlanta, Tampa, Seattle, Detroit, Minneapolis, Miami, Denver, Sacramento, Pittsburgh and Baltimore. CBS local stations in these areas will return to AT&T U-verse, DirecTV, and DirecTV Now lineups sometime today.

The renewed retransmission consent contract covers carriage of these stations and CBS-owned CBS Sports Network and Smithsonian Channel for the next several years and could broaden carriage of the two CBS cable networks to additional AT&T platforms in the coming months.

Terms of the agreement were not disclosed, but analysts suggest AT&T is now paying several dollars a month per subscriber for each over the air station. AT&T had earlier claimed CBS was being unreasonable in requesting a substantial hike in rates to continue carrying stations that viewers can get over the air for free.

AT&T is still engaged in weeks-long disputes with several Nexstar and Sinclair-managed local station, resulting in ongoing station blackouts in markets around the country.