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AT&T preparing streaming service that could integrate WarnerMedia assets

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AT&T preparing streaming service that could integrate WarnerMedia assets

The details may not come until later this year, but it sounds like AT&T Inc.'s WarnerMedia is preparing a direct-to-consumer service that could feature programming assets across its HBO / Cinemax (US), Warner Bros. Pictures International and Turner Broadcasting System Inc. holdings.

WarnerMedia CEO John Stankey said a fair amount of work is already underway and the company will announce specifics in the fourth quarter.

Nevertheless, Stankey, speaking at the Bank of America Merrill Lynch Media, Communications and Entertainment Conference on Sept. 6, provided an outline of sorts, one that begins with HBO, the premium network, which is already in the streaming game with HBO Now and authenticated TV Everywhere service HBO Go.

Although he called HBO a unique brand, and one AT&T will allocate more resources to in order to facilitate increased production as a means to battle churn, Stankey is not happy that "maybe only 40% of households engage" with the network. He aspires to make HBO "more accessible and more available," and he believes "that there’s a value proposition that can penetrate more deeply."

That alone, though, is not enough for AT&T, as Stankey said the company is "going to need more around that, and that is probably going to come under other brands that are bundled together."

He said the service would need to "allow customers to assemble the content in a way that makes sense for them and their household," but it must "have brand distinction as a customer navigates through different types of content and different levels of engagement. And I think we've got a great library to be able to do that."

Asked about Netflix Inc.'s growth and international opportunities, Stankey said different market characteristics, relative to embedded competitors, local content regulations and broadband capabilities, will shape WarnerMedia's strategies abroad. "It’s going to be variants of products that fit into particular markets," he said.

While direct-to-consumer may not be applicable for all territories, Stankey does expect "as we mature our strategy, that we're going to find ways to have direct customer relationships outside of the United States that are going to be important in sustaining this business moving forward. But it will be a market-by-market, region-by-region assessment."

Commenting on the U.S. Department of Justice's appeal to vacate a district court judge's ruling that allowed for the purchase of Time Warner Inc., Stankey said it was a weak case that was "demonstrated by the court," and that "it is weak case on appeal. That doesn't mean that we don't respect the process and we're not going to go through and run it through the completion, which we need to do."

Regarding whether the standstill agreement with respect to keeping Turner a separate business is impacting AT&T's ability to effect its merger plan, Stankey said there are "commercial relationships in place that either can be sustained or can be unwound if they need to be," relative to plans to integrate advertising inventory.

On the expense side, he said many costs pertain to the overall operations of the business. "What we do with holding company employees and restructuring the holding company has nothing to do with Turner, and there's near-term expense savings associated with that," he said. "What we do on normalizing contracts, again, we can do that in our legal contracts that allow us to unwind them in the event that there's something that we don't anticipate to happen with the appeal."