AT&T explains how its new content business could aid wireless sales

In conjunction with the release of its second quarter financial results, AT&T provided a look into its new corporate structure and leadership stemming from the close of its acquisition of Time Warner. And, more importantly, the executive in charge of AT&T’s wireless business sought to explain exactly how ownership of HBO, “Batman,” “Game of Thrones” and other Time Warner properties might affect the company’s wireless business.

John Donovan is now head of AT&T Communications, one of the company’s four major business units (the others are Lori Lee’s Latin America business, Brian Lesser’s Advertising and Analytics business and John Stankey’s WarnerMedia business). AT&T Communications primarily comprises the company’s wireless, video and broadband businesses, meaning that Donovan oversees everything from AT&T’s 5G network buildout to the company’s wired ISP business to its DirecTV satellite video business to its new streaming video services, from AT&T Watch to DirecTV Now.

Donovan, who reports to CEO Randall Stephenson, noted that the operator has made some progress in the intersection of wireless and video through its 2015 acquisition of satellite TV company DirecTV. As part of that acquisition, Donovan explained, AT&T sought to bundle its wireless services with streaming video offerings like DirecTV Now. Donovan labeled that strategy as “bundling up,” wherein AT&T could sell its wireless services to its new DirecTV customers, and vice versa.

“You see the same opportunities here,” Donovan said of the intersection of AT&T’s wireless business and its new WarnerMedia-branded content business, which owns properties like DC Comics and the Warner Bros. movie studio. "How do you trade off an acquisition dollar for a dollar of content? How do you trade off a customer install cost versus a churn reduction? We've built some solid muscle to know how those economics move around, so we are really thrilled about what the content business can mean for us, in simple ways.”

Specifically, Donovan pointed to how AT&T owning content might increase traffic to its retail stores. “One of our wireless strengths is that our ‘close rates’ in stores are up,” he said, pointing to the rate at which shoppers exit AT&T stores with a new line of wireless service. “We want more traffic in the store. If we have a tentpole [movie] release from the studio, we can find a way to integrate it in stores and drive traffic. We found the synergy. So basic things that video does, like drive traffic and hours of consumption, become assets for us to acquire value and ARPU [average revenue per user] and retain customers. And we really are hitting our stride in how to move those currencies across franchises. So, we're really thrilled about what this can do for broadband and for mobility."

Donovan may have been referencing AT&T’s promotional efforts around last year’s “Justice League” movie from Warner Bros. AT&T promoted the film—which featured comic book characters including Batman, Superman and Wonder Woman—through a variety of activities and events in AT&T stores around the country.

Indeed, AT&T’s Stephenson explained that the company—thanks in part to its acquisition of DirecTV and Time Warner—today counts 170 million direct-to-customer relationships. Those relationships stretch from sales of wireless services to streaming services like DirecTV Now and HBO Now.

“We’ve now assembled the ingredients for a modern media company,” Stephenson said, adding that the company will work to increase the number of its direct-to-consumer relationships and expand sales through those relationships.

Interestingly, AT&T’s Donovan also explained how the company might eke out additional revenues from those direct-to-consumer relationships. He said that, in both AT&T’s wireless business and in its video business, the company is working to introduce services at a variety of price points in order to engage with customers at various levels. "What we're trying to do is differentiate the product in ways that don't have to do with speeds, megabytes or rack-rate pricing. So, what we're really focused on is product engagement,” he said. “We’re kind of spreading the offers to fit budgets and engagement. You've seen that in wireless and I would point out to you that that pattern may look familiar in video. We're trying to find various price points, engagements and content combinations that fit everybody's budget, so that everybody feels that they're getting value.”

Just last month AT&T introduced two new unlimited data plans—called Unlimited &More and Unlimited &More Premium—that offer more pricing options. Similarly, on the video side, AT&T introduced a $15-per-month WatchTV service that’s less expensive than AT&T’s DirecTV Now service. And AT&T promised to launch a more expensive premium streaming video option later this year. “Now all of a sudden you have a whole series of products,” Donovan said.