While AT&T (T) Chairman and Chief Executive Officer Randall Stephens spoke at Vanity Fair's New Establishment Summit in Los Angeles Wednesday, he was clearly very aware of the debate over consumer privacy in Washington.
"This is the issue of the day," Stephenson said. Noting the concerns in Washington, he suggested that corporations ignore data privacy "at their own peril."
As Hollywood and technology executives have been talking about the future of media at the magazine's confab, former Equifax (EFX) Chairman and CEO Richard Smith has faced scrutiny in House and Senate hearings about the company's massive security breach. Lawmakers have questioned how Equifax protected its data, and whether it even deserves to have some information without consent from consumers.
Using consumer data to boost ad sales is a central focus of AT&T's purchase of Time Warner (TWX) for $85.4 billion, or $108.7 billion including the assumed debt. Stephenson said that DirecTV has been able to charge two to three times the amount that legacy media can bill for advertising, because the data AT&T can glean from its network helps advertisers to focus their ads. AT&T plans to use its consumer data to drive a similar increase in the ad rates that Time Warner charges for Turner's networks.
Media and tech companies need to think about how they deal with consumer privacy in general, Stephenson suggested. "The world is moving to place [that] a lot people in this room would not like," he said, an "opt-in world" in which consumers have to give approval for how corporations use their data.
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AT&T has experimented with giving customers financial incentives in exchange for using their information in Austin, Texas, he said. For high-speed broadband connections that cost $100 per month, AT&T has offered a discounted rate of $70 if the customer allows the telecom to use their data to sell ads. Acceptance rates have been from 94% to 96%, Stephenson said.
If AT&T can boost its ad rates to multiples of what Time Warner currently charges, Stephenson said, the company could reduce the number of spots that it airs and differentiate its programming from other networks.
The AT&T CEO suggested that antitrust regulators actually like the kind of vertical consolidation that brings together media distribution and content creation. The deals would allow AT&T to squeeze out costs and offer deals such as its $10 per-month DirecTV Now streaming service to customers who also subscribe to its wireless service, he said.
Of course, antitrust regulators may also question the concentration of power within one company, and consider the effect that the purchase of Time Warner would have on competing network operators.
As for consumer data and privacy, Stephenson suggested that tech and media companies come up with their own solution before lawmakers act.
"If we wait for somebody else to deal with it," Stephenson said, "we probably aren't going to like the answer."