AT&T CFO John Stephens: WarnerMedia Layoffs Were “Not Because We Needed To Adjust Anything” After HBO Max Bow

AT&T CFO John Stephens said the layoffs currently affecting WarnerMedia should not be seen as a course correction after the May launch of HBO Max, but rather as a “refocusing” of the company.

The executive discussed the reductions of about 600 WarnerMedia staffers and many other topics during an online appearance Tuesday at the Oppenheimer Technology, Internet & Communications Conference.

Starting Friday and continuing into this week, the restructuring was punctuated by the departures of entertainment chairman Bob Greenblatt and HBO Max chief content officer Kevin Reilly. The two had been installed as the principal architects of the streaming effort by John Stankey when he was overseeing WarnerMedia. Earlier this year, Stankey became CEO of AT&T and former Hulu chief Jason Kilar took over WarnerMedia.

The reorganization reflects an effort to become “super-hyper-focused” on direct-to-consumer streaming, Stephens said.

“All of these groups are then focused and speak with one voice and, quite frankly, allow for some streamlining of support services and back office and G&A services,” Stephens said. “So we can take that and continue to invest that money in being able to put the best content out there. I view it as more of a refocusing of the company. … This is a transformation of making things better, not because we needed to adjust anything but rather because we’re striving to get even better than the launch was, to get even better than WarnerMedia has traditionally performed.”

Asked about the company’s overall priorities for the second half of 2020, Stephens didn’t hesitate. “The biggest thing, the most exciting thing for us is HBO Max,” he said.

The May 27 debut of the service was “really successful,” Stephens said, echoing Stankey’s characterization of it to Wall Street analysts as “flawless.”

The company disclosed in its most recent quarterly report that HBO Max had attracted 4.1 million sign-ups, both from new consumer outreach and from existing HBO subscribers activating their access to Max. That number wasn’t an official subscriber tally and also fell short of the 10 million existing HBO customers as of launch day who had access to HBO Max through their AT&T wireless or pay-TV subscriptions. Still, executives said it puts HBO Max on track to reach its five-year targets of 75-90 million global subscribers, 50 million of them in the U.S.

“In this challenging environment, we’ve actually grown HBO customers in total,” Stephens said.

The streaming effort is “going well and we’re really excited about it going forward, not only for HBO or for HBO Max, not only for our digital platforms, but quite frankly for what it will do for our ability to grow fiber, grow wireless, take our existing wireless customers up to the elite packages that include HBO Max.”

Stephens was asked about the company’s net debt, which was $180 billion at the start of 2019 as it was starting to digest the acquisition of Time Warner. As of June 30, it was $153 billion. “We’re going to continue to pay down debt,” the CFO said.

In the current climate of favorable interest rates, the cost of AT&T’s debt is not a major concern, Stephens said. The company recently closed debt issues at rates below 2%, near historic lows. “It compares very well to the days when we had much less debt” but were paying rates closer to 7%, he said. “The issue is really the quantity of debt. 150 is a large number. Getting that down into a more comfortable number, where the marketplace is more comfortable” remains a priority, he added.

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