As DirecTV tanks, AT&T says it will “bundle up” TV with HBO Max

Enlarge / AT&T executive John Stankey during a presentation for investors at Warner Bros. Studios on October 29, 2019, in Burbank, California.

AT&T’s traditional TV activities are tankers, with the company losing nearly 5 million satellite and wire TV customers since the end of 2016.

But AT&T President John Stankey sees a way forward in re-creating the traditional cable TV bundle on the internet. AT & T’s HBO Max is scheduled to launch in May 2020 for $ 14.99 a month, and AT&T has set an ambitious goal of 50 million US subscribers within five years.

Such a subscriber number would make HBO Max much larger than the DirecTV satellite division of AT&T and its fixed TV service U-verse. But in the end, the services that customers receive can look similar to DirecTV, U-verse or cable TV.

“Stankey said the vision for HBO Max is to create a bundle of content with films and shows that are not owned by WarnerMedia, in addition to those that make it themselves and licenses it,” Vox wrote yesterday in a report entitled “HBO Max wants are the next cable bundle instead of the next Netflix. “The report summarizes an interview Stankey gave at Recode’s Code Media conference.

“At a certain point in time, HBO Max will be a platform that others can access,” Stankey said, “I don’t think we will ever have a slot or a monopoly on creativity from my point of view.”

“Merge again and bundle again”

Stankey, a 34-year-old AT&T employee who is president and chief operating officer, is second in command with AT&T CEO Randall Stephenson and may stand in line to become CEO when Stephenson retires. He is also CEO of WarnerMedia, the AT&T division that includes HBO.

Stankey noted that the proliferation of online video services has caused the traditional cable bundle to be “fragmented” across multiple platforms. Customers are frustrated with ‘the fragmentation of the bundle’, but AT&T can reassemble the bundle, Stankey said.

“We are in fact unbundling to bundle again,” Stankey said. “At some point there will be platforms that will re-aggregate and bundle, and we would like the (HBO Max) platform to eventually become a place where re-aggregation takes place. And that doesn’t just mean our content.”

You can see the entire Stankey interview in the video below. The bundle discussion starts at 29:10 AM:

(Embed) https://www.youtube.com/watch?v=k-gUi8Oju90 (/ embed)

John Stankey of AT&T and recodes Senior Media Correspondent Peter Kafka on stage at Code Media 2019 in Los Angeles.

Expect with AT&T price increases

If AT&T completely recreated the cable bundle and still charged $ 14.99 per month, that would be a good deal. But that’s not likely, because AT&T has already developed a history of raising prices for online streaming to much higher prices than the introduction prices.

DirecTV Now, AT & T’s online alternative to DirecTV satellite service, was initially set up in 2016 as a $ 35-per-month plan with more than 100 channels. But AT&T has increased prices several times and reduced the number of channels by removing channels that are not part of Time Warner Inc.

The service, since the name “AT&T TV Now”, today costs $ 65 a month for 45 channels, including HBO. Packages with more than 100 channels cost at least $ 124 per month, while the “Ultimate” package costs $ 135 per month for 125 channels.

At $ 14.99 per month, the price of HBO Max would be comparable to the standard and premium offer from Netflix that costs $ 12.99 and $ 15.99 respectively. The price of HBO Max would also be identical to the current price of HBO Now, although HBO Max would have all HBO content plus other things. But as we noted with the DirecTV Now example, it would not be surprising to see AT&T significantly increase HBO Max prices in the years following the launch.

AT&T ridicules concerns about net neutrality

AT&T becoming a bigger player in online video would cause net neutrality, because AT&T could use its control over home and mobile broadband networks to send customers away from competing online services and to AT&Ts.

In yesterday’s Recode interview, Stankey claimed that it would be ridiculous for someone to worry about AT&T or other internet providers that restrict competition with online streaming.

“It would be hard to point to an example of someone’s behavior that would suggest that there is some form of discrimination, favoritism, or something else going on in how people get content on the internet through a broadband connection,” Stankey said. “It’s a problem that doesn’t exist. Absolutely nothing is happening.”

Stankey prefers that consumers focus their brand elsewhere. “I would be much more concerned about the extent of what is happening in the field of distribution platforms on mobile operating systems, about the terms and conditions associated with the development of new products and what it does to crush innovation than anything else has to do with how traffic over the internet is treated today, “he said.

But Stankey is wrong that AT&T has not shown “favoritism” in the handling of video services. The Federal Communications Commission in January 2017 accused AT&T and Verizon of violating net neutrality rules by having their own video services (including AT & T’s DirecTV) stream on their mobile networks without regard to customer data caps, while other video providers Data charged Cap exemptions.

FCC chairman Ajit Pai withdrew that finding shortly after the acquisition, but that does not alter the fact that AT&T treated its own video content favorably under the data caps imposed on its mobile service.

AT&T currently imposes data caps from 150 GB to 1 TB on most of its home broadband plans, making it difficult for TV viewers to lose cable or satellite and only use online streaming. But AT&T gives customers an upgrade to unlimited data if they pay an extra $ 30 per month or subscribe to DirecTV or U-verse TV. That means that customers who prefer online streaming over AT & T’s own TV services must pay $ 30 extra per month to get enough data or pay $ 10 for each additional 50 GB.

According to these schemes, AT&T has not intentionally damaged the streaming performance of Netflix and other third-party services. But AT&T has made it more expensive for customers on AT&T broadband connections to make extensive use of those third-party services. The company has also used the advantage of unlimited data to push customers to AT & T’s own TV services.

The old net neutrality rules do not contain a prohibition on data caps or zero rating schemes that exempt content from data caps, but the FCC evaluated individual implementations to determine whether they were anti-competitive or anti-consumer. Since the withdrawal of the Trump government, the FCC has not enforced net neutrality rules or investigated data caps practices. But the state of Washington enforces a net neutrality law and states such as California intend to do so in the future after all professions have been exhausted in a lawsuit over the withdrawal of the FCC by the net neutrality rules.

Stankey says that AT&T will not misuse its control over broadband networks, regardless of whether net neutrality rules are maintained in the future. “There was nothing (in terms of discriminatory ISPs). It didn’t happen,” he said yesterday. “We all want a good broadband connection that people can use to get where they want to be.”