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Blunt New CEO Inherits Challenge of Turning AT&T Into Media Star

Blunt New CEO Inherits Challenge of Turning AT&T Into Media Star

(Bloomberg) -- John Stankey, who was named AT&T Inc.’s CEO this week after a long career at the company, knows how to command a stage.

The executive is 6-foot-5 and has a booming voice, almost like a P.A. announcer. But what stands out more is his ability to be blunt.

When pitching AT&T’s new HBO Max streaming platform, he told the audience that anyone unwilling to pay $15 a month for the service had a low IQ. 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.”

Blunt New CEO Inherits Challenge of Turning AT&T Into Media Star

Just this week, the 57-year-old jolted Hollywood by saying he was “rethinking the theatrical model” because of the coronavirus pandemic. AT&T’s Warner Bros. and other studios have already been skipping theatrical releases of movies like “Scoob!” because cinemas are shut down. But most executives are careful to avoid implying that it’s anything other than temporary.

Stankey doesn’t dance around issues -- he barrels right through them.

“He’s no shrinking violet,” said Jennifer Fritzsche, an analyst at Wells Fargo & Co. “Stankey is direct, and that might be exactly what we need right now.”

The Los Angeles native went to Loyola Marymount University for a finance degree and UCLA for his MBA. He has spent the past three decades at AT&T in its various iterations, starting as a customer service rep taking new phone installation orders.

Stankey is succeeding longtime Chief Executive Officer Randall Stephenson on July 1, vaulting him to the top of a company that’s been transformed in the past decade. The former Ma Bell is still the largest telecom company in the U.S., but also the biggest provider of pay-TV service. And thanks to the 2018 acquisition of Time Warner, it’s one of the world’s biggest media operations as well.

That won’t be an easy thing to manage. Though Stankey is an AT&T lifer, like his predecessor, he’s still learning how to be a media mogul.

His rise to the top of AT&T can be traced back to an aggressive consolidation strategy under former CEO Ed Whitacre. Stephenson and Stankey spent their early careers at SBC, one of the so-called “Baby Bells” that resulted from the breakup of AT&T.

Under Whitacre, SBC gobbled up the other Baby Bells, eventually retaking the name AT&T.

His Turn

“It was Whitacre that put Humpty Dumpty back together after the breakup of the phone company,” said Roger Entner, an analyst with Recon Analytics LLC. “Then Randall transformed it again. Now its Stankey’s turn.”

But Stankey has won the trust of some investors by vowing not to continue the aggressive takeovers that turned AT&T into one of the most indebted companies in the U.S.

The payoff from those deals has been mixed. After AT&T bought DirecTV in 2015, the satellite service lost a quarter of its subscribers. The Time Warner purchase cost $85 billion and brought a drawn-out battle with antitrust enforcers. The fact that AT&T now owns CNN makes it the target of barbs from the president, who thinks the network is biased against him.

Elliott Management Corp., the activist investment firm that’s been one of AT&T’s sharpest critics, was initially opposed to Stankey becoming CEO. But it ultimately supported the move after the executive promised to run AT&T as more of an operator than an empire builder, according to people familiar with the matter. And the stability of having a longtime AT&T executive command the business became more appealing during the coronavirus crisis.

Stankey also is frank about AT&T’s challenges.

When speaking with analysts, he starts conversations by pointing to some of the biggest problems AT&T is grappling with -- like the company’s alarming TV subscriber losses.

And he’s won respect for breaking down divisions at AT&T, even though it’s been a painful journey.

After the Time Warner acquisition two years ago, Stankey was appointed to run the division, renamed WarnerMedia. His style bruised egos, and he oversaw an exodus of executives at the business. That included the powerful heads of the HBO and Turner divisions, Richard Plepler and David Levy.

Watching ‘Succession’

Putting Stankey atop an entertainment empire was puzzling to some, considering his own TV habits had mainly just involved sporting events.

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.

Despite initial promises to keep the hard-nosed telecom side of AT&T away from the media assets, Stankey demolished the walls between divisions like HBO, Turner and Warner Bros. in order to focus the effort on a battle with Netflix Inc. The linchpin of AT&T’s media strategy is HBO Max, which will debut next month with a deep library of popular TV shows like “Friends” and premium content like “Westworld” and “Game of Thrones.”

HBO Max is arriving a bit late to the streaming party, and it’s gotten crowded. Walt Disney Co. released Disney+ last year, and Comcast Corp.’s Peacock and the short-form video service Quibi both debuted this month.

At $15 a month, HBO Max also is at the high end of the scale. The company can’t charge less than that because it’s the current price of HBO, but AT&T said this week that it might test different promotions to make HBO Max more palatable.

Even if HBO Max is a huge success, it’s just one piece of the AT&T puzzle. The company also has to figure out how to whittle down its debt, upgrade its network to 5G and manage the steady outflow of DirecTV customers.

Warner Bros., meanwhile, just lost its Lego franchise to Comcast’s Universal Pictures. That film series had once been one of the studio’s three pillars, alongside DC Comics and Harry Potter.

And Stankey has to navigate the disappearance of sports, advertising and movie releases during the pandemic.

AT&T is so big and sprawling now, it’s hard to tell if anyone can run it effectively -- even someone like Stankey, who’s worked in all different parts of the business.

“It’s an incredibly complex company,” Recon’s Entner said. “He’ll be seen as a genius if it works out.”

©2020 Bloomberg L.P.