CEOs of AT&T and Time Warner Speak to CNN
CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: Let's talk, Randall, why buy Time Warner?</s>RANDALL STEPHENSON,, CHAIRMAN & CEO, AT&T: Its seems to us like a very natural extension of what we do. We're in an environment where our customers are demanding more and more video, more and more entertainment content, not only on the TV, but on the mobile device. And we have a really large customer base in mobility. And the ability to take really premium quality content to our customers in the mobile environment is huge for us. It's huge for our customers. And as we made the scan and looked for premium content to bring to our customers, this is the premium content we think on the planet right now. And so the ability to do something special like this with Time Warner is just a very natural extension for us.</s>ROMANS: Why sell now, Jeff?</s>JEFF BEWKES, CHAIRMAN & CEO, TIME WARNER: Well, it's not really selling, it's joining.</s>ROMANS: All right.</s>BEWKES: And so this is our biggest customer. It's our biggest partner. DirecTV, AT&T and then all these mobile customers that we now will have together. And what allows us to do is just move faster with more innovation, better consumer offerings, more different price points, more effective advertising and, therefore, people are going to see that more of the cost of content can be borne by advertising and the experience of watching television can be better.</s>ROMANS: So what changes for the consumer, for somebody watching us right now. Randall, what changes for them with these two companies together?</s>STEPHENSON: Oh, I think you're going to see the pace of innovation in terms of delivering meaningful premium content to the customer on mobile devices. That pace of innovation is what's going to change. And - and we all are trying to innovate in this way. And our experience is, when you're trying to do meaningful innovation and bring new product and capability to market, doing it in arm's length contracts is always really, really hard. And so you put these two companies together, now the two companies are working together to change how the customer experiences entertainment, how the customer experiences CNN, literally. That's what we think will change. The customer's demanding not only the entertainment, not only the content, but the ability to integrate social, doing clipping and posting and social interaction with their content. So these are the kind of things we really want to move fast through.</s>ROMANS: Talk to me more about how you see the future audience consuming the stuff. You know, you've got this young millennial who does - in many cases they don't want to ever have a cable package, right? They're viewing this content differently. How does this deal see that or feed that?</s>STEPHENSON: So the millennials, and - in fact our customer base in general is not consuming less content. Our customers are consuming more premium content today than they've ever consumed. But they're consuming it in different places. They're not consuming it just on the television in their living room. They're consuming it now on their tablet. They're consuming it on the mobile device, on the go, and they're consuming it everywhere. And it's - it's really stark if you look at the - the amount of volumes, how they're increasing traffic going to these mobile devices.</s>ROMANS: Right.</s>STEPHENSON: That's video driven. And so where - we see that continuing. But we see that if we can actually innovate and curate to content differently and bring to the customer differently, we actually think this doesn't slow down, this accelerates. And this is the really important thing here because we're really excited about, as this accelerates, as this demand for premium content on these mobile devices continues to grow, it gives us more and more incentive to invest more and more in infrastructure.</s>ROMANS: Right.</s>BEWKES: Right.</s>STEPHENSON: And innovate in infrastructure. This idea of 5G technology.</s>ROMANS: What is that?</s>STEPHENSON: It's the next generation of mobile technology. So think about the fastest Internet speed you get from the cable company is a gig, right, that we - you can buy a gig of speed. 5G will allow us to provide a gig of speed to you wirelessly. And as we innovate this kind of content, having a 1 gig wireless network, so our customers can stream any kind of content, any kind of video anywhere. Ultimately, we think we'll be competing head to head with the cable companies with a wireless offer. We can hit those kind of price points, combine it with this kind of content. We think this is exciting.</s>ROMANS: You know, we were talking about that cable-free customer or the customer who wants to be cable-free and Time Warner - well, you and I have talked about some of the things that Time Warner has already been doing to sort of see this Film Struck (ph) for example.</s>BEWKES: Yes.</s>ROMANS: You know, talk to me a little bit about how this deal, how this deal fits into that.</s>BEWKES: Well, we've had a progression for years. We wanted to have more video on demand. That was launched at HBO about 15 years ago. And then progressively we've seen broadband delivery give us more VOD service. Think of Netflix. Think of Hulu. Think of Amazon. And we added Film Struck, which is for film buffs. We've got HBO now available. So you can subscribe to that without adding anything else. You can do it a number of ways. And I think what we're going to see is with this kind of a platform and, you know, we believe this will be essentially a catalyst to more competition, more innovation and what we'd like to see is all the distributor companies basically doing more choices, more experiments. And we think this will, if consumers like the kind of packages and more competition leads to more - it leads to lower prices, it leads to happier consumers and it tells us where to go.</s>ROMANS: So eight weeks ago you first met in this building to start kind of talking about this. That's pretty quick for such a big merger. Tell me a little bit about the timing here because we are in the midst of what is, I think, the most populous presidential election in modern history where, you know, big is bad and I'm wondering if that timing play had any effect on you guys.</s>STEPHENSON: No, it had no effect on it. I - I came to see Jeff because our businesses, obviously, do a lot together.</s>ROMANS: Right.</s>STEPHENSON: And we buy a lot of Time Warner content. And so we see each other regularly. We get together regularly. And came by to see Jeff. We had lunch. And as we began to talk, me about where I saw the world of distribution going, 5G that we've spoken of here this morning, and where he saw the world of content, of premium content moving and we just really came to an agreement that these things are converging and they're going to converge very, very quickly.</s>ROMANS: Just think how - I mean a movie studio and a phone company. I mean you think about how quickly things have really changed in terms of both of your - both of your businesses. I'm wondering about the regulatory scrutiny. I mean you look at the front pages of the papers today and, you know, immediate opposition is almost in every single headline first paragraph. We've heard folks on the campaign trail talking about Hillary Clinton, have said that she will - you know, her spokesman said that they will, you know, give it scrutiny if she is president.</s>STEPHENSON: Right.</s>ROIMANS: Donald Trump says it shouldn't be allowed to happen. Are - and there will be hearing in Congress, no question. Are you worried about the regulatory scrutiny at all?</s>STEPHENSON: Well, obviously, we're very attentive to it. We - we've announced a lot of big deals and this - this is not too much different than what we've seen in the past. This deal is unique, though, from any deal that we've ever done of any size. And, in fact, it's unique in this regard. This is a true vertical integration of two companies.</s>ROMANS: Explain what that means. It means - it means it's not as if two companies do the same thing already.</s>STEPHENSON: Yes. Yes, so think about AT&T. We've tried to buy T- Mobile.</s>ROMANS: Right.</s>STEPHENSON: That was a horizontal integration. That was a concern that the government had is that a competitor was viewed to be taken out of the market. This transaction is not horizontal. We don't compete. In fact, it's vertical. Jeff is a supplier to</s>AT&T. ROMANS: Right.</s>STEPHENSON: His content is part of our package we buy.</s>ROMANS: Right.</s>STEPHENSON: Vertical integrations have a very standard review in the regulatory process. And there's not a - there's not a competitor being taken out and, in fact, you're hard pressed to find in either one of our industries a time when a vertical integration was shot down by regulators. Generally what happens is where the regulators have concerns with the - a merger like this, they'll put conditions on it and impose conditions to help remedy the concerns that they may have.</s>ROMANS: And you're ready for that?</s>STEPHENSON: Yes, we're - we're ready for a review. We expect it to be a vigorous review. Like you said, we're sure that we'll get a chance to visit with Congress and tell our story there. But we feel like the information and the data will drive this and the law will drive this.</s>ROMANS: This has been compared - some have been raising the Comcast/NBC merger and saying, you know, that there was some - you know, it's been</s>STEPHENSON: No, I mean, look, when the regulators looked at Comcast/NBCU, the biggest concerns at that time - there were two of them, right, net neutrality, needed to insure that they protected net neutrality -</s>ROMANS: Right.</s>STEPHENSON: And over the top video. And I think if you look at this transaction, six years after that, the net neutrality debate, I think it's over. I think the case was settled by the circuit court and I think net neutrality is behind us. Over the top, I think Netflix is somehow going to make it. I think they're going to pull through. I think they're going to make it, right?</s>ROMANS: Let me ask you about CNN and its independence here because CNN is just one of the many, many name brands that are in the Time Warner stable. But you have said that AT&T will not be reaching into how CNN does its business or tells its story.</s>STEPHENSON: I watched how Jeff manages this business today and I think it's a model for how we want to manage it in the future. And, look, I - I think of a brand like CNN and the key variable of your brand is your independence. And when people watch CNN, are they getting an independent assessment and reporting of the news. The last thing we want to do as AT&T is in any way taint that in the slightest bit.</s>ROMANS: And you're sure - they understand the separation of all that?</s>BEWKES: Yes. You know, you've been at CNN for many years and it's been owned by Time Warner. Has it been interfered with? I think no.</s>ROMANS: No.</s>BEWKES: And why? There are two things. People watch news channels if they trust them to be independent, honest and objective. That's always the challenge. And when you're looking for the best journalists in the world, you would only work at a news channel that lived up to that standard.</s>ROMANS: What changes for the Time Warner brand? You stay on for how long?</s>BEWKES: Well, at least a few years after the - we'll all - we'll all do it as long as we're useful for the new company and -</s>STEPHENSON: This is great. This is the first time I've heard you say a few years. This is a really big moment.</s>ROMANS: And you have the tape. You can always reroll the tape.</s>BEWKES: Well, we've got a year to get to the - to get to the close and then we need some period of time, but we have some tremendous executives in both of our companies -</s>ROMANS: And you think -</s>BEWKES: That are going to be, you know, we've - we're always trying to build the next generation.</s>ROMANS: Trying to build the next generation. So you keep Time Warner sort of operating those brand as they are now with the leadership they have now?</s>BEWKES: Yes.</s>STEPHENSON: Absolutely.</s>ROMANS: And move forward. At what point, you know, they operate as two sort of separate companies, AT&T and Time Warner?</s>STEPHENSON: Yes. I mean you should think of Time Warner becoming a wholly owned subsidiary of AT&T. And, look, I mean, Jeff has built an amazing company over here with some amazing brands and I don't envision us stepping in here and, like, we're going to fix this. I mean this is a well-run company. I said at the very beginning, I think this is the premium content brand company in the world. So I don't envision us changing a lot with it. What we do want to figure out, and this will be the management art that we have to figure out, and that is, how do we begin to think differently about curating this content and formatting this content in new ways that we can get it to our customers in different ways and different formats and getting that seamlessly working across the two companies, that will be the management art we have to figure out.</s>ROMANS: So tell me again, I mean what we're talking here is how - what content is going to look like in five years and how together you guys can harness it and get it to people. But for consumers, you know, they want to know what's going to change for them. Their Bills? You know, their phone bills, their cable bills? What is the biggest thing that they'll notice differently, do you think?</s>BEWKES: They're going to have more choices of different channel packages. If they want a big package of a lot of channels on their big screen TVs and they can watch the show and walk out of the house with a tablet and have seamless connection, or maybe they don't want that. Maybe they've got - it's a young couple that wants to use mobile devices to watch. Maybe they don't want the full package of channels. There will be more choice, I think better prices for consumers. There will be -</s>ROMANS: You think better prices for consumers?</s>BEWKES: Yes. More competition usually leads to more price reductions.</s>STEPHENSON: I'll give you a classic example of this. You'll see this actually next month, and that is, one thing we've been working on since we closed on the DirecTV acquisition is a purely over the top -</s>BEWKES: Yes.</s>STEPHENSON: Content package.</s>ROMANS: Right.</s>STEPHENSON: We're calling it DirecTV Now.</s>ROMANS: Right.</s>STEPHENSON: This is a mobile centric, purely over the top package that's going to our consumers. This is going to be a radically lower price point than what the consumer is expecting or has typically paid. And it's going to be 100 plus channels. We're not talking channels that nobody watches.</s>ROMANS: Right, right, right.</s>STEPHENSON: This is 100 plus premium channels. All of this content will be on there. ESPN, the Disney content. This is a very, very different experience. Mobile centric is designed for the tablet and the smartphone. Now think about having an anchor tenant like Time Warner whose content is in here and HBO and that content and how you can begin to integrate social into this. And social interaction, and can we clip the content and send it to friends, and interact with our friends on this. These are the kinds of things that we think are going to iterate much, much faster and change how the consumer experiences content.</s>ROMANS: Jeff, let me ask you about your legacy, this company. I mean you've - I mean you've been - what are your thoughts, I guess?</s>BEWKES: Well, I think it's our company.</s>ROMANS: Forty (ph) years, right?</s>BEWKES: It's - you're in it, too.</s>ROMANS: Yes.</s>BEWKES: Look, this company invented the magazine.</s>ROMANS: Right.</s>BEWKES: It invented satellite delivered non-ad sported TV at HBO. It invented 24 news at CNN. And so we're very proud of the information of informing people, of telling authentic stories. And this will help us to do even more investment, even more variety and keep evolving the distribution system. That's what this is about is making sure that the breakthrough content that we're seeing an explosion, not just in our company, but in all the television companies. We need to get this out across the world in a way that harnesses the 21st century of mobile devices, broadband delivery, VOD. There's so much programming, you need a good interface to figure out what is it, what do I want to watch. And that's what this will help.</s>ALISYN CAMEROTA, CNN ANCHOR: Our thanks to Christine Romans for helping us with that. Well, in our next story, they put their lives on the line to serve our country. And they got bonuses to re-enlist in the Army. Now, the government wants that money back, with interest. Next, we talk to a soldier dealing with this troubling turn of events.