AT&T CFO John Stephens Says Warner Bros. Has “Long History Working With Talent” But Covid Is A Reality “We Can’t Change”


John Stephens, the outgoing CFO of WarnerMedia parent AT&T, defended the company’s move to release its 2021 film slate concurrently on HBO Max and in theaters and cited Warner Bros. century-long relationship with Hollywood talent — with some disgruntled at the move and the way it was communicated.

“We’ve got a long history of working with the talent and will continue to work with them. I think we’ve got a reputation that goes [back] decades. Warner Bros. studio in particular, it’s just decades and decades, almost a hundred years,” he said at a virtual media conference Tuesday when asked about the risk of a talent drain to rival studios that have taken a different approach.

“This is a unique situation” he said, with the pandemic shuttering or reducing capacity at theaters globally “and we can’t change that, that is just the reality. So we are trying to keep this system moving healthily forward and to utilizing the great content that is already there.”

The relationship with theaters is “an important relationship,” he said. “But it is having challenges so we are trying to use these valuable pieces of content in the best way we can in coordination with the theaters, and with HBO Max, we feel good about utilizing this in the best way we can and we’ll see how it goes. We are excited for it. We are positive about it.”

Stephens will be retiring in March after 28 years at the company. WarnerMedia CFO Pascal Desroches has been named to succeed him, effective April 1 and is serving as AT&T’s senior executive vice president – finance during the transition.

Stephens declined to offer an update on HBO Max subscriber numbers ahead of fourth-quarter earnings later this month but told the Citi TMT West conference that the service was helping drive subscriptions to the telco giant’s highest-tier unlimited plans.

CEO John Stankey said in December that HBO Max had 12.6 activations. The target by 2025 is 50 million subs in the U.S. and 75-90 million globally.

Some on Wall Street have been skeptical of AT&T’s foray into entertainment with the acquisition of Time Warner that add lots of debt. In an online survey of Citi conference attendees asking whether they believe vertical integration will help spur future revenue growth, 48% were neutral, 28% negative and 25% positive. But Stephens described the company as, in one sense, focused on monthly subscriptions businesses and growing relationships with customers, and that HBO Max and WarnerMedia are  valuable part of that now.

AT&T shares fell about 25% in 2020, underperforming much of the entertainment space. Stephens touted its massive cash flow — an estimated $26 billion last year — and healthy dividends, and said the debt should be put in context. The company has been selling assets (Central European Media, Crunchyroll, and ongoing speculation about DirecTV) and been extremely active in its debt management, aggressively refinancing at interest rates “that are lower than what they were ten years ago.”

“What we have seen is a really significant progress in managing the balance sheet … that is often underappreciated,” Stephens said.

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