Comcast’s bad omen for the AT&T

Cord-cutting isn’t stopping. As it turns out, that’s not such bad news for cable giants like Comcast Corp. It is, however, for AT&T Inc.
The streaming wars intensified in the fourth quarter amid Walt Disney Co.’s advertising blitz for its new Disney+ service that overtook billboards, shopping malls, public transit and Twitter feeds. At the same time, Apple Inc. began giving away Apple TV+ free to anyone buying a new iDevice of some sort. Comcast is the first of the traditional media giants to report results for this period, giving a glimpse at how the pay-TV industry fared as consumers were given more reasons than ever before to ditch cable, skip the box office and start streaming from their couches.
Comcast itself reported a generally strong quarter: It signed up 442,000 net new internet customers, one of its biggest boosts ever, while the NBCUniversal media networks took in higher ad revenue and guests also spent more money at its theme parks. Film was a weak spot, with adjusted Ebitda in that business dropping nearly 50%, as its musical “Cats” bombed in theaters. Even more telling, though, was that Comcast’s cable unit lost more video subscribers than expected — 149,000, mostly residential — a sour indicator for AT&T, which is scheduled to report its own results on January 29.
Although Comcast may be best known (or hated) by consumers for its cable-TV service, that’s actually its least relevant business. Internet users at Comcast have outnumbered video subscribers since at least 2015, and Comcast management has done a good job of shifting attention to the growth coming from broadband. In unveiling its Peacock app Comcast also gave investors confidence that it’s taking a different tack in streaming than its rivals, choosing to go the free, ad-supported route, which will help Peacock garner eyeballs and not have to compete on price like the others are.
AT&T is another story. The wireless carrier is carrying a boatload of debt from its 2018 acquisition of Time Warner, a deal that tied AT&T’s fortunes to the more volatile and uncertain future of pay TV.
AT&T’s WarnerMedia division will introduce HBO Max in May for a monthly subscription price of $15, the same rate as regular HBO but with the added bonus of a library of Warner Bros. films, content from its Turner networks, old episodes of “Friends” and “The Big Bang Theory” and a slate of original content. But HBO is still the main reason to get HBO Max, and so the question becomes, does everyone who wants HBO already have it? AT&T is investing $2 billion in the product this year, an expense that will ramp up to $4 billion by 2024. It’s not expected to start making money until following year.
Between the debt and streaming foray, the new AT&T still has a lot to prove — and a lot to spend. It won’t help matters if its media networks take a big hit from cord-cutting and if a chunk of those cord-cutters are fleeing DirecTV specifically.
—Bloomberg

Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals