It was supposed to be the ultimate alliance of content and distribution -- a media powerhouse that could deliver personalized entertainment to millions of wireless and home internet subscribers, with advertising tailored to their tastes, Bloomberg reports.
But the streaming revolution has moved faster than AT&T Inc. expected since its deals with DirectTV and Time Warner, siphoning away the television subscribers who were supposed to fund its programming investments. Shareholders remained skeptical, and one prominent activist investor intervened.
Now AT&T is poised to spin off its media operations as part of a deal with Discovery Inc. Here’s how the marriage of its media and telecommunications came together and fell apart.
May 2014: DirecTV Deal
After reassembling AT&T as a national telecommunications giant, Chief Executive Officer Randall Stephenson was eager to move beyond his phone company roots. The acquisition of DirecTV for about $50 billion gave him millions of video subscribers across the country to complement the television service AT&T offered over its internet lines to homes. But skeptics pointed to DirecTV’s mode of delivery -- satellite -- to question whether AT&T would really find savings through the acquisition.
After the DirecTV acquisition, Stephenson was preoccupied by how Google and Facebook were dominating the advertising industry. He envisioned using media properties to develop a targeted advertising service where companies could use viewership data to pinpoint their messages to receptive audiences. Buying Time Warner was a bold way to do it, giving AT&T some of Hollywood’s most prized assets, including HBO, CNN and the Warner Bros. studio.
November 2017: Trump’s Justice Department Intervenes
Like most of America, Stephenson didn’t see Donald Trump’s presidency coming when he led AT&T into the Time Warner deal. At first, it seemed like a business-friendly administration might make the path to approval easier, but the Justice Department sued to block the transaction -- a move AT&T executives would later attribute to Trump’s animosity toward CNN. The lawsuit slowed AT&T’s ability to close the deal by several months, even as Netflix was busy transforming the media landscape.
September 2019: Elliott Steps In
Just over a year after the Time Warner deal finally closed, it was clear Stephenson’s vision was slow to become reality. The company had almost $200 billion in debt after its series of transactions, and DirecTV subscribers were cutting the cord en masse. Elliott Management Corp., billionaire Paul Singer’s hedge fund, disclosed a $3.2 billion stake and outlined a plan to divest DirecTV and stop making major deals.
July 2020: Stephenson Retires
The architect of AT&T’s media-telecom empire stepped down, ceding way to John Stankey, a longtime veteran of the company’s telecommunications division who had more recently presided over the entertainment business. Elliott had been reluctant to have Stephenson’s appointed successor take over, but grew to embrace Stankey’s vision of AT&T as an operator rather than an empire builder, people famliar with the matter said then.
February 2021: DirecTV Spinoff
AT&T agreed to a valuation of about $16 billion -- a fraction of what it paid -- to shed full ownership of a company that had come to be seen as an albatross. The deal let AT&T take billions of dollars in debt off of its books.
May 2021: Discovery Talks
AT&T is in discussions to combine media assets with Discovery Inc., Bloomberg reported, a deal that could make a major unwinding of the colossus built by Stankey’s predecessor. A transaction could be announced as soon as this week, according to people familiar with the matter.
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