In a concerted effort to focus more on video streaming service, AT&T Inc. (T - Free Report) has decided to restructure its WarnerMedia business and fine tune its operating model with the evolving needs of customers. The strategic move will equip the company to play catch-up with avant-garde media firms like Netflix, Inc. (NFLX - Free Report) and The Walt Disney Company (DIS - Free Report) to secure a bigger pie of the digital advertising market.
As part of the overhaul process of the newly minted WarnerMedia unit, AT&T will consolidate all its affiliates and ad sales groups under a unified platform, with its units organized under entertainment networks, live programming, content production and affiliate and advertising sales. The revamped WarnerMedia Entertainment will include premium cable network HBO, Turner cable channels TNT, TBS, Tru TV and the upcoming video streaming service. WarnerMedia News and Sports will include CNN, Turner Sports, Bleacher Report and regional sports networks.
AT&T has also reorganized the management structure within WarnerMedia, with former NBC Entertainment chairman Robert Greenblatt now being at the helm of Entertainment unit and CNN chief Jeff Zucker overseeing the operations of News and Sports division. Kevin Tsujihara will continue to run Warner Bros Hollywood and TV studios along with the licensed consumer products business across the company and a newly created kids and young adult group. The affiliate and advertising sales unit will be run by Gerhard Zeiler, who earlier served as the president of Turner International
The management overhaul followed the departure of two high-profile executives — Richard Plepler, the head of HBO; and David Levy, the president of Turner Broadcasting. The shakeup is expected to offer greater flexibility and agility to better coordinate original programming and distribute them through emerging platforms such as streaming. It also marked a strategic shift to a new business model wherein Turner and HBO units, which previously operated as standalone entities, were clubbed under a single operating unit.
AT&T has been ramping up its streaming services with the launch of live TV channels DirecTV Now in 2016, and a cheaper live-TV service WatchTV in 2018. With modest successes in both these ventures and continued subscriber loss in its DirecTV satellite TV business as users tend to shift to Internet video services, AT&T intends to focus more on video streaming content. The company aims to launch an early version of its HBO-led subscription video streaming service later this year while continuing HBO Now as a separate streaming service. This is likely to bring stiff competition to Netflix, which has built a 150-million subscriber base with direct-to-consumer video streaming services, and Disney, which is set to launch its Disney+ streaming service by the year end.
The business restructuring has led to intense speculations of massive layoffs within the company. However, AT&T seems to be keener to generate additional revenues from more video content and subsequent ads through these videos, rather than saving costs through layoffs. This, in turn, would enable the company to capture a greater market share in the digital ad business and augment its position as a media behemoth with significant presence in the telecommunication sector as well.
Despite such innovative products and services, the stock has lost 18.7% over the past year compared with the industry's fall of 0.9%. With a focused roadmap, AT&T appears poised to turn the tables in 2019, which is likely to be a decisive year for it.
AT&T presently has a Zacks Rank #3 (Hold). A better-ranked stock in the industry is Telenav, Inc. (TNAV - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Telenav beat earnings estimates in each of the last four quarters, the average being 23.7%.
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