Code Conference ’18: Stephenson, Murdock Talk Premium Content and Ad Models

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PALOS VERDES, Calif. – AT&T CEO Randall Stephenson told those gathered at tech pub Recode’s annual Code Conference last week that premium content is going to be “very relevant” five or six years from now.

“Premium content consumption is not going down; it’s going up … [and] advertisers love premium content platforms,” said Stephenson, whose company is attempting to buy content producer Time Warner.

He added that “vertical” media business deals – which include distribution, content production, advertising platforms – means "everyone is headed down the same path. A lot of bandwidth is going to be required to make that happen." 

Analysts say AT&T owning Time Warner would give it a step ahead in selling better advertising – all due to its deep consumer data through its current businesses.

Stephenson says while Time Warner’s Turner networks have a large supply of TV ad inventory to sell, to date, that effort hasn’t been largely focused around a targeted advertising approach.

“AT&T has an amazing amount of data – 40 million pay TV subscribers in North and South America, 130 million mobile subscribers, and 16 million broadband subscribers. We have really great customer insight into the shows, media and content they are viewing and where they are. There are going to be new business models surrounding ad-driven type models,” Stephenson says.

Meanwhile, 21st Century Fox CEO James Murdoch talked Hulu and told the crowd that giving consumers the option to choose whether or not they want advertising makes for more effective ads, while maintaining a stable business model.

He said about half of all subscribers to Hulu choose the less expensive subscription supported by advertising. At the company's upfront presentation in May, the company said that the number of subscribers to its ad-supported product were up 40 percent year over year. The most recent figures show that about 60 percent have chosen Hulu's ad-free option.

Hulu’s base subscription runs $7.99 per month and is ad-supported. For an extra $4 per month, consumers can opt for a plan that is nearly ad-free. The company also offers a live TV streaming service that contains the usual ad breaks in programming. 

“I think once you empower the customer, and you make it really transparent, that it’s really about how they’re valuing their time,” Murdock said. “Then they also complain a lot less about the ads, because they’ve been given a choice and empowered.”

While Murdoch is bullish on the ad business for sports and live programming, he sounded less optimistic on the future of ad-supported scripted programming. 

“I think the advertising business is one that does look very tricky going forward in scripted entertainment,” Murdoch said. “When you invest an enormous amount in telling these stories as well as we can, and kind of achieving the suspension of disbelief, and you really have the customer or the viewer enjoying what they’re seeing, and you interrupt them to communicate something about Kit Kats, or beer … it’s just not a good experience. So I think we have to do much, much more investing in making it better.”