AT&T CEO John Stankey said managing passwords is a key to long-term sustainability in the streaming business and something he and his team had in mind well before HBO Max launched. He made the comments on a call with analysts following AT&T’s latest earnings and two days after Netflix revealed that 100 million viewers use its service for free by sharing passwords.
“We were thoughtful about how we built the product and that we gave customers enough flexibility but we don’t want to see rampant abuse,” Stankey said. Products and features were built in “consistent with the user agreement that has terms and conditions of how they can and can’t use the service, and we have enforced it.”
“We actively in any given month are looking at how any give users are using the product… I think that’s the right way for the industry to be managed and I think maybe some are going to adjust practices over time.”
It may be the last question the chief executive ever gets about entertainment. The first quarter was AT&T’s last with WarnerMedia, which detached from earlier this month in a merger creating the new Warner. Bros Discovery.
“Two weeks ago, we reached a major milestone in the repositioning of our business,” Stankey said. “David [Zaslav] inherits an organization with one of the best global portfolios of intellectual property, a team of unparalleled talent and one of the few truly global direct to consumer players.”
HBO Max and HBO hit nearly 77 million subscribers in the quarter, up nearly 3 million from the year before. Many top Warner Media execs were shown the door as the merger closed. WBD unveiled its new international leadership team this morning.
“Were excited about potential for continued HBO Max growth as the service launches in more new territories. Warner Bros. Discovery is well positioned to lead the transformation we are seeing unfold across the media and entertainment landscape. Like many of my fellow AT&T shareholders who own a stake in this new and promising enterprise, we are excited to continue to watch their success and the value they create,” Stankey said.
The transaction was a spinoff and AT&T shareholders ended up owning 71% of the stock of WBD. It also included a $40+ billion cash payout and unloading some WarnerMedia debt. AT&T exits the increasingly cash hungry streaming business and to focus on telecom operations that also require very hefty investments (about $25 billion both this year and next).
AT&T CFO Pascal Desroches said content investment rose by $600 million for the period including for the newly launched CNN+, knocked operating income lower. Free cash flow declined by $2.6 billion.