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can start a streaming service, and any
consumer can watch it. It’s an end lessly,
constantly fluid environment to a degree
that has never existed before.
That reality may comfort Stephenson as
he faces the many skeptics. Their logic is
moored to old assumptions about a world
that no longer exists, one could argue. He
may find further comfort in knowing he
can combine WarnerMedia’s killer content
with something no other media company
has or is likely to have, a nationwide wire-
less network that will be 5G in a few years.
But three other wireless networks (two, if
Sprint and T-Mobile merge) are available
for rent, and in a fluid, digital world, who
knows what Buffett’s “very smart people
with lots of resources” might do?
The uncertainties, the challenges, and
the competition all seem daunting. But
it’s possible, maybe necessary, to take a
different attitude. “It’s not daunting—
it’s exciting,” says Donovan, Stephenson’s
lieutenant who runs AT&T’s nonmedia op-
erations. “These are the best of times. The
greatest gift that Randall has given to this
corporation is the inspiration of knowing
that people believe that it’s difficult, believe
that we may be wrong. It’s so amazing to
wake up and say, ‘We have all these tools
and weapons, and the world thinks we
might be wrong.’ That is motivation.”
It’s a cheerful, hopeful perspective. But
Donovan and his boss know AT&T isn’t the
only content-plus-distribution army with
powerful weapons. Come to think of it, it
calls to mind the twisted, bloody plotlines
in a certain medieval fantasy series. Except
for AT&T, the stakes are quite real.ing HBO free to wireless customers with top-tier plans. “AT&T’s
strategy for delivering an integrated offering to consumers has
heretofore amounted to simple discounting, and to devastating ef-
fect,” he says. Moffett also doubts AT&T can achieve the $1.5 billion
in annual cost savings it has promised investors. John Stephens,
AT&T’s chief financial officer, says those cost-saving plans “remain
on target.”
Another skeptic believes AT&T wasn’t rigorous enough in think-
ing it all through. Making a vertical acquisition in order to control
your destiny isn’t necessarily a bad idea, says Roger Martin, a
longtime strategy consultant who has advised Verizon in the past.
“If you can buy into a part of the industry upstream or downstream
and you can have competitive advantage there, it’s kind of a no-
brainer,” he says. The key is whether you can acquire a company
that holds true competitive advantage—“because if you can’t, it’ll
just be the anchor around your neck.”
It’s clear to Martin that WarnerMedia cannot hold a competi-
tive advantage in content creation. “Others are dropping unprec-
edented levels of spending into the business,” he says. Analysts
estimate Disney will spend $21 billion on content this year, Netflix
$15 billion, and AT&T $14 billion. (None of the companies will
comment on those estimates.) “If you’re AT&T, where do you
stand?” Martin asks. “You’re spending less on content than Netflix
and Disney, and you won’t beat Verizon on 5G. Where does that
leave you?” The answer, he believes, is the dreaded locale identi-
fied by strategy authority Michael Porter as the worst place for any
company to be strategically: caught in the middle.
Even Warren Buffett quails at the prospect of competing in such
a powerful field of rivals. “Everybody has just got two eyeballs,
and they’ve got x hours of discretionary time ... maybe four or five
hours a day,” he said recently at a charity event, speaking generally
about the entertainment industry. “You’ve got some very, very, very
big players that are going to fight over those eyeballs. The eyeballs
aren’t going to double. You have very smart people with lots of
resources trying to figure out how to grab another half-hour of
your time.” His assessment: “I would not want to play in that game
myself. That’s too tough for me.”
Any business that Buffett wants to avoid sounds unpromising,
but Stephenson rejects the legendary investor’s premise. Acknowl-
edging that “there are only 16 waking hours in the day,” he says,
“Well, we haven’t filled up the 16 hours yet.” He nods toward his
office window over Commerce Street with its busy traffic, which he
says will ease when 5G networks enable autonomous cars. “When
you have the lion’s share of those cars autonomous, for the aver-
age person that’s another two hours of availability of screen time,
consuming video.”
T
HE LARGER REALITY, the fact that makes one’s head spin
trying to grasp AT&T’s future, is the long-heralded
arrival of what for years the telecom industry called
“convergence.” Virtually all data—a text, your location
history, a CT scan, Casablanca—is digital and available almost
instantly to almost anyone, anywhere, anytime. Any company
FORTUNE 500
WARREN BUFFETT : CEO, Berkshire Hathaway