AT&T Told to Sell DirecTV by Hedge Fund Investor

[osu1991]

https://www.multichannel.com/news/att-told-by-hedge-fund-to-sell-directv

AT&T’s top management has been asked by a hedge fund investor to sell its struggling DirecTV satellite TV operation.

Elliott Management put out a press release this morning that includes a letter from the firm, addressed to AT&T CEO Randall Stephenson and the board of directors. The missive outlines what Elliott views as a series of strategic mis-steps by the telecom, including the aborted attempt to buy T-Mobile back in 2011. These mis-steps have resulted in AT&T being undervalued, Eliott said

But more than anything, the hedge fund — which claims to control $3.2 billion worth of AT&T stock — is unhappy about the 2015 acquisition of DirecTV, which it said was acquired for $67 billion "at the absolute peak of the linear TV market.” Since AT&T’s purchase of the satellite TV operator, the division has lost more than 20% of its customers.

 

[Joe h]

To be fair, if AT&T bought Netflix, I wouldn’t be shocked if they shed 20% of its subscribers in half the time it took to run directv into the ground. AT&T is just really bad at reading the pulse of it’s customers. They didn’t even own time warner for a month before shedding 5 million hbo subscribers overnight thanks to their dish network dispute.

 

[navychop]

I don’t see a divestment any time soon. They have a plan and will carry it out.


Sent from my iPhone using SatelliteGuys App. For now.

 

[lparsons21]

I don’t see a divestment any time soon. They have a plan and will carry it out.


Sent from my iPhone using SatelliteGuys App. For now.

Watching what ATT is doing with sat and streaming, it isn’t obvious they have any kind of coherent plan!


Sent from my iPad using Tapatalk Pro

 

[Jimbo]

I don’t see a divestment any time soon. They have a plan and will carry it out.


Sent from my iPhone using SatelliteGuys App. For now.

I agree.

 

[NashGuy]

Watching what ATT is doing with sat and streaming, it isn’t obvious they have any kind of coherent plan!

I disagree. The plan is this: make HBO Max their main direct-to-consumer video service. It will include nearly all of the content that they actually *own* (and they do own a LOT of high-quality stuff). HBO Max will be their answer to Netflix and Hulu+Disney+. Gradually shift all their HBO subscribers over to HBO Max, with as many of them as possible signing up and getting billed directly via AT&T so that they don't have to pay a cut of the monthly subscription fee to middle-man distributors, whether that's digital partners like Apple and Amazon or traditional cable partners like Comcast, Charter and Verizon. And for those who do pay through those partners, decrease the % cut that they give them versus what they've historically paid out for distributing HBO and Cinemax. The coming era is all about direct-to-consumer. Cut out the middle-men as much as possible.

Beyond that, sure, AT&T wants to continue to distribute live cable channel bundle services for as long as that remains a viable business model (sometime in the late 2020s?). Remember, most of those cable channels are owned by other giants like Disney, NBCU and ViacomCBS who are also pursuing their own direct-to-consumer plans. For AT&T TV and DirecTV, the plan is to, first of all, include ALL of AT&T's own channels along with HBO Max in each and every bundle they sell. Duh. Next step: cut out the (non-AT&T-owned) fat in those channel bundles so that they can offer skinnier bundles that include just the most popular channels in the main tier, allowing AT&T to sell it at a reasonable price point while still making a profit on it (beyond the profit that they're already making on their own HBO Max and AT&T-owned channels inside the package). Getting the main channel tier priced low is important, because that increases the number of subscribers, which allows them -- at least on AT&T TV -- to serve up more data-enabled targeted ads inside those live cable channels, the cloud DVR recordings, and the on-demand stuff too. Scale is critical.

How do they ramp up the subscriber count on their streaming services AT&T TV and HBO Max? As I've already said, HBO Max will be bundled inside every channel package sold to new subscribers on both AT&T TV and DirecTV. And they'll try to increase the sub count on AT&T TV by pricing it lower than DirecTV for the same channel packages while actively encouraging DirecTV subs to switch over to AT&T TV. They'll also work to convert subscribers on the no-longer-sold Uverse TV system over to AT&T TV.

It's all been pretty clear to me for some time now. Their long-term future star is HBO Max. AT&T TV will play a supporting role until the cable channel system fades away years from now. Everything else is just noise.

 

[Tampa8]

Based on several things At&t have been doing including not flinching having no HBO on DISH I also have thought for sometime their end game is to go direct with an HBO service and perhaps not distribute it to a middle man or as suggested above cut the % to the middle man if they still want the programming. Their direct service will probably include more than HBO.

I bet more than just this one investor is trying to get At&t to divest of Directv. It's their goal anyway so they may be open to going faster than the original plan. But getting someone to pay what they will want is another story. If they are willing to go the fire sale route I know a Satellite provider that might be interested.

 

[Radioguy41]

U-Verse
AT&T TV
AT&T TV Now
WatchTV
DirecTV
HBO Now
HBO Go
HBO Max
DC Universe

These are all the offerings from AT&T. That look like a coherent plan to you?

 

[Jimbo]

I disagree. The plan is this: make HBO Max their main direct-to-consumer video service. It will include nearly all of the content that they actually *own* (and they do own a LOT of high-quality stuff). HBO Max will be their answer to Netflix and Hulu+Disney+. Gradually shift all their HBO subscribers over to HBO Max, with as many of them as possible signing up and getting billed directly via AT&T so that they don't have to pay a cut of the monthly subscription fee to middle-man distributors, whether that's digital partners like Apple and Amazon or traditional cable partners like Comcast, Charter and Verizon. And for those who do pay through those partners, decrease the % cut that they give them versus what they've historically paid out for distributing HBO and Cinemax. The coming era is all about direct-to-consumer. Cut out the middle-men as much as possible.

Beyond that, sure, AT&T wants to continue to distribute live cable channel bundle services for as long as that remains a viable business model (sometime in the late 2020s?). Remember, most of those cable channels are owned by other giants like Disney, NBCU and ViacomCBS who are also pursuing their own direct-to-consumer plans. For AT&T TV and DirecTV, the plan is to, first of all, include ALL of AT&T's own channels along with HBO Max in each and every bundle they sell. Duh. Next step: cut out the (non-AT&T-owned) fat in those channel bundles so that they can offer skinnier bundles that include just the most popular channels in the main tier, allowing AT&T to sell it at a reasonable price point while still making a profit on it (beyond the profit that they're already making on their own HBO Max and AT&T-owned channels inside the package). Getting the main channel tier priced low is important, because that increases the number of subscribers, which allows them -- at least on AT&T TV -- to serve up more data-enabled targeted ads inside those live cable channels, the cloud DVR recordings, and the on-demand stuff too. Scale is critical.

How do they ramp up the subscriber count on their streaming services AT&T TV and HBO Max? As I've already said, HBO Max will be bundled inside every channel package sold to new subscribers on both AT&T TV and DirecTV. And they'll try to increase the sub count on AT&T TV by pricing it lower than DirecTV for the same channel packages while actively encouraging DirecTV subs to switch over to AT&T TV. They'll also work to convert subscribers on the no-longer-sold Uverse TV system over to AT&T TV.

It's all been pretty clear to me for some time now. Their long-term future star is HBO Max. AT&T TV will play a supporting role until the cable channel system fades away years from now. Everything else is just noise.

Yes, I agree with what your saying here, however ...it won't be as simple as your making it sound ...

About a year ago, D* Now was the Big Push ...now it will be abandoned ... merged into yet another service ...
HBO Max is the latest greatest they have to offer ..... more than likely, it will be the IT service for them for a few years and then they will push it aside and make yet another ...

They seem to be throwing stuff at the wall and seeing what sticks ... they had what, 6 different formats going and are now dwindling it down.

I can see HBO Max being gone in say 3-4 years and merged into something else.

IF ... I were thinking about changing to a Streaming service, (and I'm not) ... I would have to think REAL HARD about actually going with AT&T at this point in time ...

 

[Jimbo]

U-Verse
AT&T TV
AT&T TV Now
WatchTV
DirecTV
HBO Now
HBO Go
HBO Max
DC Universe

These are all the offerings from AT&T. That look like a coherent plan to you?

Thats what I was saying ...

Ya gotta think that they will look at what channels from these offerings are being watched and dwindle this down to about 2 or 3 offerings.

 

[Willh699]

if AT&T does sell off DirecTV, who would buy it. it would be a hard sell if it is Dish that is the only one trying to buy it, i say it should be Comcast or Charter that should just buy it out and lump them into their Cable TV platform under the Xfinity Satellite or Spectrum Satellite branding.

while Dish would be the main buyer, but the government may not approved a merger of the two main satellite TV provider due to having a monopoly on TV in rural areas where there is no cable or high speed internet options for TV broadcasting options.

 

[RobertSM]

if AT&T does sell off DirecTV, who would buy it. it would be a hard sell if it is Dish that is the only one trying to buy it, i say it should be Comcast or Charter that should just buy it out and lump them into their Cable TV platform under the Xfinity Satellite or Spectrum Satellite branding.

while Dish would be the main buyer, but the government may not approved a merger of the two main satellite TV provider due to having a monopoly on TV in rural areas where there is no cable or high speed internet options for TV broadcasting options.

Apple? Finally gets them in the tv business they’ve been walking the thin line on.

 

[Claude Greiner]

To be fair, if AT&T bought Netflix, I wouldn’t be shocked if they shed 20% of its subscribers in half the time it took to run directv into the ground. AT&T is just really bad at reading the pulse of it’s customers. They didn’t even own time warner for a month before shedding 5 million hbo subscribers overnight thanks to their dish network dispute.

And they likely got half of those subscribers back either due to switching providers or HBO now.

 

[Claude Greiner]

What one investor says sell, and now all of a sudden there is a fire sale?

Directv ain’t going anywhere until AT&T has a plan to deliver fiber to a majority of their subscribers and transition them off satellite

If they do sell to Dirt Network, it will be the left over subscribers who will never see high speed internet in their neck of the woods

 

[VictoriaFTA]

U-Verse
AT&T TV
AT&T TV Now
WatchTV
DirecTV
HBO Now
HBO Go
HBO Max
DC Universe

These are all the offerings from AT&T. That look like a coherent plan to you?

Which one of these is the plan where they have 4K HDR streams and starting using x264 to encode their 1080p videos instead of that sh!tty Zencoder platform? Because they should drop all the other services and go with that one. Zencoder based streaming services are absolute garbage.

Also, that $67 billion purchase of DirecTV will go down as one of the biggest business blunders in history. They could have rolled out fiber to the home to their entire footprint with that money instead of their current strategy of selecting a handful of houses to have fiber offered to them in a bunch of different markets. Right now AT&T claims to offer fiber in hundreds of cities but the truth is they only offer it to a select few houses in each of those cities so they are getting their ass whopped by cable anywhere in those cities that aren't lucky enough to be one of AT&T's cherrypicked neighborhoods/buildings. Cable's footprint is CITY-WIDE whereas AT&T's fiber footprint maxes out at maybe 10% of a city.

Fiber to the home being offered as ubiquitously as DSL would have ensured that AT&T would remain a viable competitor to the cable companies and have a product to deliver their streaming services over. Right now most folks are gonna have to sign up for an Internet connection from the cable company to stream AT&T's TV offerings in acceptable quality.

tl;dr: investing in satellite instead of fiber is a stupid move for a company in 2019 and it was a stupid move in 2015

 

[Jimbo]

Which one of these is the plan where they have 4K HDR streams and starting using x264 to encode their 1080p videos instead of that sh!tty Zencoder platform? Because they should drop all the other services and go with that one. Zencoder based streaming services are absolute garbage.

Also, that $67 billion purchase of DirecTV will go down as one of the biggest business blunders in history. They could have rolled out fiber to the home to their entire footprint with that money instead of their current strategy of selecting a handful of houses to have fiber offered to them in a bunch of different markets. Right now AT&T claims to offer fiber in hundreds of cities but the truth is they only offer it to a select few houses in each of those cities so they are getting their ass whopped by cable anywhere in those cities that aren't lucky enough to be one of AT&T's cherrypicked neighborhoods/buildings. Cable's footprint is CITY-WIDE whereas AT&T's fiber footprint maxes out at maybe 10% of a city.

Fiber to the home being offered as ubiquitously as DSL would have ensured that AT&T would remain a viable competitor to the cable companies and have a product to deliver their streaming services over. Right now most folks are gonna have to sign up for an Internet connection from the cable company to stream AT&T's TV offerings in acceptable quality.

tl;dr: investing in satellite instead of fiber is a stupid move for a company in 2019 and it was a stupid move in 2015

Maybe in SOME cities ....
Cable isn't running Fiber ANYWHERE here that I am aware of ...
ATT Is.

As you mention, ATT has only a small percentage running fiber in the city, but it's more than Cable.

Of course, your referring to "To the Home" ...
ATT has been using fiber in the city for many many years now.

 

[Juan]

The "phone company" has a habit of developing a plan...dump a ton of money on it...then abandoning that plan a couple years later because the next big thing comes along...thats exactly what is happening with directv...the got their original streaming product 1/2 way developed...but then got stars in their eyes when they saw something else that would allow them to get rid of expensive satellites..they will keep throwing money at it until something else they see as more profitable comes along

Yes, I agree with what your saying here, however ...it won't be as simple as your making it sound ...

About a year ago, D* Now was the Big Push ...now it will be abandoned ... merged into yet another service ...
HBO Max is the latest greatest they have to offer ..... more than likely, it will be the IT service for them for a few years and then they will push it aside and make yet another ...

They seem to be throwing stuff at the wall and seeing what sticks ... they had what, 6 different formats going and are now dwindling it down.

I can see HBO Max being gone in say 3-4 years and merged into something else.

IF ... I were thinking about changing to a Streaming service, (and I'm not) ... I would have to think REAL HARD about actually going with AT&T at this point in time ...

Sent from my SM-G950U using the SatelliteGuys app!

 

[Juan]

Not fiber..high speed internet via 5g or fiber

What one investor says sell, and now all of a sudden there is a fire sale?

Directv ain’t going anywhere until AT&T has a plan to deliver fiber to a majority of their subscribers and transition them off satellite

If they do sell to Dirt Network, it will be the left over subscribers who will never see high speed internet in their neck of the woods

Sent from my SM-G950U using the SatelliteGuys app!

 

[larry55]

We are finally getting high speed Internet here. Our plans now to stay with D. Maybe later but now we will have option. We got the SundayTicket at no charge for the first time this season.

 

[NashGuy]

U-Verse
AT&T TV
AT&T TV Now
WatchTV
DirecTV
HBO Now
HBO Go
HBO Max
DC Universe

These are all the offerings from AT&T. That look like a coherent plan to you?

I would say that the situation right now is like walking into a store that's in the middle of remodeling. They're still doing business but things are sort of a mess -- the store organization doesn't make much sense, there's sawdust on the floor, etc. But if you go away and come back in a few months for the grand re-opening, you say, "Wow! This is a really nice store!"

As for those services you name, here's what I think they'll offer by the end of 2020:

• AT&T TV: main flagship cable TV service marketed nationwide to anyone with home or mobile internet, especially to customers of AT&T Fiber/Internet and/or AT&T Wireless
• DirecTV: alternative cable TV service for those without broadband access, no longer widely advertised at the national level

• HBO Max: main flagship direct-to-consumer streaming service (mainly featuring WarnerMedia's own content). Will have the option to add on the same packages of live channels that AT&T TV offers. Always contract-free.
• HBO Go: free streaming app for subscribers who are still on traditional HBO. This will only apply to customers who subscribe through a traditional cable operator that has not chosen to distribute the new HBO Max in place of regular HBO. Customers who get HBO Max through their cable provider (or through a digital provider, or directly from AT&T/HBO Max) will use the HBO Max app. At some point in the early 2020s, after all the current distribution contracts for regular HBO have expired, HBO will cease to exist as a separate service and so will the HBO Go app. At that point, the only home for HBO content will be HBO Max.
• DC Universe: niche app for super-fans of DC Comics, delivering access to years of back issues, along with some DC video content. Select original series on DC Universe, such as Doom Patrol, also appear on HBO Max.

These will all be dead:

• AT&T TV Now: will simply morph into the live channel add-on option inside HBO Max
• AT&T Watch TV: will become the new Starter package inside AT&T TV and AT&T TV Now (then HBO Max). But like the Plus and Max packages, Starter will also include HBO Max.
• HBO Now: will have no reason to exist as a $15 standalone service featuring only HBO content when HBO Max will be available as a standalone service with all the same content plus much more for the same price.
• Cinemax & Max Go: will cease to exist as a service or even as an ongoing brand. Past seasons of Cinemax originals (e.g. The Knick, Banshee) will reside exclusively in HBO Max. Any current Cinemax original series that continue to be made (e.g. Warrior, Jett) will be rebranded as "Max Originals," which is the name that WarnerMedia has revealed for their line of original series and films exclusive to HBO Max.

Yes, I agree with what your saying here, however ...it won't be as simple as your making it sound ...

About a year ago, D* Now was the Big Push ...now it will be abandoned ... merged into yet another service ...
HBO Max is the latest greatest they have to offer ..... more than likely, it will be the IT service for them for a few years and then they will push it aside and make yet another ...

They seem to be throwing stuff at the wall and seeing what sticks ... they had what, 6 different formats going and are now dwindling it down.

I can see HBO Max being gone in say 3-4 years and merged into something else.

IF ... I were thinking about changing to a Streaming service, (and I'm not) ... I would have to think REAL HARD about actually going with AT&T at this point in time ...

I can't imagine what else HBO Max could be merged into unless AT&T acquired *yet another* major media owner (e.g. Netflix or ViacomCBS or Discovery, etc.) to combine with WarnerMedia. Because right now, it's looking like HBO Max will contain just about everything that WarnerMedia offers, with the exception of live news and sports. It looks like those will remain exclusive to their CNN, TBS and TNT channels, at least at first. Although it sounds like they might offer a way to add that live stuff in to HBO Max (short of adding on a full bundle of live cable channels), so we'll see.

Now, I do think that there may be some risk in them putting virtually all their eggs into the HBO Max basket. Maybe it would be better to do what Disney is doing, where they break out mainstream/basic entertainment (Hulu) vs premium (Disney+) vs sports (ESPN+). ViacomCBS looks to be doing something similar: free ad-supported (Pluto TV) vs mainstream/basic entertainment (CBS All Access) vs premium (Showtime). Some might think it would have been better for WarnerMedia to keep HBO on its own as a pure premium (maybe folding Cinemax into to beef it up a bit more) and then had a separate mainstream/basic service featuring everything else that will be in HBO Max. I think AT&T is looking at Netflix, though, which is a one-stop-shop that includes everything they've got and they felt like they needed to go all-in on a similar service that could go toe-to-toe with Netflix.

We'll see how it plays out...