While Walt Disney Co. (DIS) shareholders fret about cord cutting and ESPN, Stephenson sees Turner's CNN, TBS and TNT networks as an advertising trove that AT&T can plunder with advertising technology and data science. The Department of Justice's reported requirement that AT&T divest either the Turner properties or DirecTV would undermine a new advertising model that AT&T is banking on.
Shares of AT&T gained 1.7% to $34 on Thursday as markets considered the risk to its Time Warner purchase. They were up another 0.8% on Friday morning.
Stephenson outlined AT&T's new advertising paradigm at an investor conference over the summer.
"Within AT&T and DirecTV, we have an inventory of advertising that we sell every year, about 200 billion impressions that we sell every year," Stephenson said at the Goldman Sachs & Co. (GS) tech and telecom conference in September. "Time Warner has 750 billion impressions that they sell every year, predominantly through Turner networks. So you put the two together, it's about 1 trillion impressions per year that will be taken to market with the advertising community."
With customer data that AT&T can glean from its networks, Stephenson says it is able to sell ads at rates two to three times higher than traditional cable networks. If AT&T can add $10 in advertising revenue per subscriber per month, Stephenson said, the company can use the savings to fund discounts or subsidize other efforts that would help attract customers to its bundle of TV, wireless phone and broadband services.
To lead its charge into a new ad business, AT&T lured ad tech executive Brian Lesser away from global advertising power WPP plc (WPPGY) over the summer.
AT&T has been building a data analytics unit that will support its ad platform for four years, CFO John Stephens said at a Wells Fargo Securities LLC event on Wednesday. "With the data insights we have off of our satellite-delivered video, off our wireline or IP video, off our wireless-delivered content and over our broadband networks, we have extensive data," he said.
AT&T sees a great opportunity to tap subscriber data in a new world of video advertising. With the increased sensitivity to consumer privacy and data security, the telecom and others who profit from customer information have to be extra careful in the increasingly perilous world of cyber crime and government oversight.
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Editors' pick: Originally published Nov. 10.