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Full video and transcript: AT&T CEO Randall Stephenson at Code 2018

On whether he would have fired Roseanne Barr: “I can’t imagine how you would not.”

Peter Kafka: Last fall, these stories are kind of similar for me. James Murdoch came on, and then his business getting sold, but he still showed up. Last fall, Randall Stephenson said he would come to Code, and then the DOJ sued him, but he’s still coming onstage. We’re very appreciative. Please welcome Randall Stephenson from AT&T.

Like I said, we don’t often have people come on while they’re being sued by the government, so I appreciate it.

Randall Stephenson: I tried to get out of it, but you wouldn’t hear no, so.

I politely suggested that you still show up. I know you’re not excited to talk about the trial, so let’s start with something easy.

I’m excited to talk about it, I just can’t.

You can talk about it a little bit. Let’s work our way into it. Roseanne Barr. Let’s talk about that. That’s fun.

I just saw Kevin Reilly at TNT. I said, “You may be tempted. Do not go sign that one up.”

That’s the first question answered. Second question, if you’re able to buy Time Warner, you’re going to end up working with the Roseanne Barrs of the world. Talent that is talented and popular and may make you a lot a money and may cause all kinds of headaches for you in a way that you haven’t had to deal with as the guy running the phone company.

When you first proposed this deal, what, a year and a half ago?

Yes, it’s just been about 18 months.

So true you’ve had many thoughts about the deal post-announcement, but how are you thinking about dealing with a talent business like this, where these people are gonna cause you both enormous profit and potential real headaches?

This is the issue you probably spend more mental cycles and intellectual cycles on than anything else. Actually, it goes both ways, but how do you protect the creative culture, the creative culture that may or may not be flattering to the parent company or people on the other side of the equation that are part of the same ownership structure? I think it’s gonna require a very disciplined managerial approach, and it’s going to be ... I’ve spent a lot of time with Jeff Bewkes and he’s spent a lot of time kind of counseling me and educating me on this, and I take it to heart. That is, look, you’re going to have to let these people go. You’ll have some guardrails, but those guardrails are pretty wide.

When you say, “Let them go,” do you mean fire them or let them do what they want?

Let them do what they want. Let them do what’s in the best interest of the Time Warner entity. At the end of the day, you’re acquiring a business that’s been very successful. It’s been run very independently. HBO is run independently from Warner Brothers, which is run independently from Turner, and it’s been a very good model. Some things we’re going to need to do to drive value into the combined businesses as you think about advertising models and what not, but you’re going to have to be disciplined to let these companies do what they do best.

But eventually, right, you’re going to have a Roseanne Barr issue if you buy Time Warner. You’re going to have someone like that that creates some kind of problem and it can bubble up to whoever is your Jeff Bewkes, but eventually, is it gonna come up to you or are you gonna let someone below you make that decision?

It would be a very rare situation that it would bubble up to me. Like Bob Iger engaging on the Roseanne Barr situation.

Right.

That’s a no-brainer, right? He dealt with that, and he dealt with it very quickly, and you have to admire how he did it, but those are the kind of things that you could see escalating. Although, one must question if that even needs to go to the CEO of Disney to effectuate that decision.

Would you have fired Roseanne Barr?

I can’t imagine how you would not.

Thank you for that direct response to that question. That’s nice. I like that. Let’s talk about the deal that you wanna get done, proposed this fall of 2016, a lot of people thought it was gonna be automatic. Since you’ve announced that deal, we’ve seen lots of moving around in the media landscape, lots of potential deals. We had James Murdoch up here yesterday talking about Disney and Fox. It seems like your deal has triggered either lots of very specific deals or a lot of deals to be made. Did you expect that was gonna happen? That once you guys said, “We’re buying Time Warner,” that would trigger off a whole series of other things?

I don’t know that it triggered off all these things or if we just got in front of a lot of things that were inevitable. And look, you’re seeing a lot of things play out that are following a set kind of formula, and that is nobody really knows what the future’s going to look like five, six years from now. But I think the bet that most people are making is premium content is going to be very, very relevant five or six years from now. A lot of bandwidth is going to be required to make all of that happen, and they’re gonna be new kind of business models surrounding this, particularly as it relates to ad-driven-type business models.

So, this whole vertical integration of distribution all the way throughout the production of media and distribution and monetization of media. Everybody’s headed down the same path. I would tell you, I even believe the T-Mobile-Sprint deal is following this same path. People are recognizing this is going to require an amazing amount of bandwidth to pump all of this content and media to mobile devices. Sprint and T-Mobile are saying, “Can we invest at a pace fast enough to stay up with this?”

So I think all of this — Vodafone, Liberty, Global in the U.K., and Comcast, what they’re trying to do with Sky — I think all of this is following that same pattern.

Seems to me that owning pipes is a great business, direct connection to the consumer, direct billing connection to the consumer, very high margin in a lot of cases. Media business seems kind of fraught in a lot of ways, and it seems like if you own the pipes, you don’t need to own the content because the content all has to come through you whether or not you own it, which is another way of me asking, I still don’t understand why you did this deal. You owning Time Warner, assets like HBO and Turner, all those companies still have to deal with the Comcasts and the Spectrums of the world, but they get an advantage.

That’s the question. You’re hittin’ the third rail, right? You hit all this bandwidth, you’re gonna need media, you’re gonna need premium media, but you also, one of the key variables to this is a direct relationship with the customer. A lot of the media companies do not have that direct relationship with the customer. There are some who do, and they’re doing quite well. Netflix has a direct relationship with the customer.

Yup.

They’re a fully integrated media distribution, direct relationship with the customer. Amazon, who’s doing the same thing. Bob Iger, obviously, has high ambitions to establishing a very direct relationship with the customer. So, if you can bring 130 million mobile customers where you have a direct billing relationship, day-to-day customer relationship, bandwidth as well as content, media and entertainment content, put all that together, then you have vertically integrated the same way as some of these other guys have. I think it’s ...

So you have that direct relationship, the media stuff you’re gonna integrate, right? Again, the value of HBO goes away or it’s severely diminished if it’s not also available to Comcast, Spectrum and everybody else.

Completely agree.

This is a court case, right? So what is the advantage you get from owning it as opposed to just having an arms-length relationship like everybody else?

So think about what’s coming together here. Turner, specifically, start there, has an amazing inventory of advertising that they just kind of sell broadly. It’s not a very targeted kind of advertising approach. AT&T has an amazing amount of data, customer data, for 40 million paid TV subscribers in North and South America, 130 million mobile subscribers, 60 million broadband subscribers. We have really great customer insight on what kind of shows, media, content they’re viewing, where they are, all kinds of information on the consumer.

Can you pair a very formidable ad inventory with a very formidable amount of data, information on the customer, viewership data and all other kinds of information, and can you create something unique just from the straight advertising platform and change how you’re monetizing content?

We actually believe there’s a strong opportunity to do this. We do this at a very small scale today, and it’s ... Y’all know the media world, but basically a Turner, every hour, they have 16 minutes of advertising inventory. Two of it goes to the distributor — Comcast, AT&T or whomever — with just our two minutes, where we use the data that I’m talking about, we monetize the advertising at three to five times what is done on just a traditional TNT, TBS and so forth.

Can you begin to move those numbers to look more like what we do in the DirecTV content by virtue of using the data? That’s a sizable benefit.

Those two or three minutes you get from Turner, right, you also get them from ESPN and you have that same advantage there.

Yeah, you’re right.

So again, I’m still confused about why owning one asset and then not owning the other ... what advantage you’re gonna get.

So, all of that inventory you spoke of in DirecTV, roughly 200 billion impressions a year. Turner? 750 billion impressions a year. Can you make the 750 from a yield standpoint look like the 200? If you can, that’s a sizable benefit. It’s a sizable benefit not just in terms of new revenue and new margins, but can you begin to change the content equation? Can you begin to do like Kevin Reilly has done at TNT and drop the advertising load? I find the traditional TV experience less than fulfilling because of the advertising load.

If you can begin to drive yields up, can you take advertising loads down? And can you actually begin to change the viewer experience with some of this content? We actually believe you can.

Jeff Bewkes is pretty good at running a media company, ask James Murdoch and his dad are very good at building a media company. These guys who are building these big companies are selling media companies to people like you. Doesn’t that give you pause, that you’re on the wrong side of the table? I asked James the same question backwards.

Look, the model has to change. I think they all recognize that. If you’re gonna just keep running the same play, then it’s probably not a very exciting business. But if you can begin to reassemble the assets in a way that can actually allow you to change the model. Can you change the advertising model? Can you change how content is distributed? 130 million mobile subscribers and you own premium content, how can you begin to experiment and innovate around the content differently to distribute to 130 million mobile subscribers? We think there’s some opportunities to really innovate in media and entertainment around that as well. Jeff Bewkes would tell you the same thing.

The last big deal you did was DirecTV a couple years ago, 2015?

2015.

You said, basically, at the time, “We bought a declining asset.” Is the rate of decline accelerated for DirecTV in terms of the subscribers?

No, actually, it’s been interesting. So we got it kind of late in ‘15. In ‘16, it followed the path that we pretty much expected it would follow. In 2017, it was kinda like a step shift in the paid TV market. It just kind of dropped down, and then did this. It’s now on the same trajectory, but it just took a step down in ‘17 that was more than we expected. As we look over the last couple of quarters, it’s back on a similar trend, but there was just a step shift ...

What did that signal to you?

We’ve asked ourselves that question a lot. We know where the traffic went and what demographic it was. It wouldn’t surprise anybody in this room.

Well, spell it out.

It’s millennials. It’s people who tend to live in apartment complexes. You can get very specific about who the people were that did the aggressive cord-cutting in 2017. It was all the people you knew who would, but there was just a step-shift in that ...

Young people who were paying you for satellite TV stopped paying you for satellite TV?

Or cable TV or whatever. Correct.

Then the satellite guys have been hit worse than the traditional cable guys right?

For a couple of quarters.

Right. Yeah.

They’re slash quarters ...

Did you see that coming?

Yeah, you know what, we did. So, some of it ... We said when we bought DirecTV, we were not in love with the satellite business. What we wanted was the ability to innovate in terms of delivering the content, specifically, moving to over the top. Getting mobile rights so we could begin distributing that content to our mobile subscribers.

So you basically thought you were buying customers, not the satellite industry?

Customers and content relationships, right? Sure enough, we bought DirecTV, within a year we stood up a product called DirecTV Now. Purely over the top, designed for the mobile environment. Within a year, year and a half, we have a million-and-a-half subscribers on that platform. It’s growing nicely. We added another 320-some-odd-thousand last quarter, and what you see in our paid TV business, 25 million subs, been very, very steady.

That’s what you wanted, right? We’re going to replace the satellite customers with the online customers.

We were at 25 million subscribers a year and a half ago. We’re at 25 million subscribers today, but a significant amount of these are an over-the-top platform.

Do you make money from the online customers, or you lose money?

Today, no. Standing up the advertising platform is a key element to this, and plus we really pushed hard to get this platform out there. We just put out a new version of the platform just two weeks ago, with the full DVR capabilities and incredible amounts of stacked content and so forth, and so we’re price and discount, we’re moving that price as we roll this out to more market base. So you get to a place where you start making money on it in the next year, year and a half, so I’m not worried about that.

I love the idea that you’re keeping a very stable, and I believe over time, a growing customer base, but it shifts. It shifts to more streamed over-the-top capabilities, and the ability to monetize advertising on those platforms is exponentially greater than traditional TV platforms.

So you don’t know the media business, but you bought a bunch of people who do or you’d like to buy a bunch of people who do. You don’t really have any background in advertising, you’re starting to import some people there. As a manager, as someone who just has not touched these businesses for years, how do you think about how much you have to learn to be able to accurately assess the job they’re doing? Or you don’t have to know any of it, you just have to listen to smart people?

Well, I mean, AT&T is a big company, we have a lot of different areas that I don’t know explicit details of many areas.

It’s your life, right?

What’s that?

You know a lot about the core AT&T business.

Yeah, but it’s all about the people that you hire to run these businesses, and Time Warner has some amazing people to run those businesses. Richard Plepler, he runs HBO, and Suzie Hara runs Warner Brothers, and John Martin ... These are all really, really good people. They’ve been in this industry a long time, and they’re gonna be very critical to the success of this business as we go forward, on the advertising side.

To your point, no, we’re not advertising experts. We went out and hired Brian Lesser from WPP, he has stood up digital advertising businesses, had a lot of success doing it. He has already built a significant team around himself, and we have put all of the AT&T big data capability under Brian, and he is blown away by what data is available and how it’s organized and ready to be put to work. And so we’re building a terrific team. I feel really good about the team coming together to run this.

Your competitors at Verizon look like they’ve looked at the same map as you and said,Well, instead of buying TV networks” — well, I guess they’ve certainly looked at them — we’re going to buy online properties and spend a bunch of money on AOL, bunch of money on Yahoo, we’re gonna go at it that way.” Why do you think they’re going that direction? Instead of going and buying traditional ...

The two models are not radically different. Both are centered around owning content, significant content, and then using the data from our distribution businesses to enhance the value of the content businesses. There going down a path of digital content, we’re going down a path of premium content, and I’m a big believer in premium content. We just had Mary Meeker in here, and I was going through her report on the way in this morning: Premium content consumption is not going down, premium content consumption is going up, and advertisers love the premium content platforms, they just want it to be more targeted and more effective. And so if you can build the capability for premium content to deliver for advertisers, very targeted and specific audiences, we actually think there’s a major opportunity there.

So the models aren’t radically different, we’re just going down premium content, and they’ve chosen digital.

Are you considering all of the consumers now are being trained by Netflix primarily, but other on-demand offerings, to expect life without commercials, and you’ve predicated this on better, more targeted advertising?

HBO is a product that’s life without commercials. Yup, they do quite well. In fact, they’re growing their direct-to-consumer business very, very nicely.

But you’ve been talking for a while now about the benefits of improved advertising, targeted advertising, that’s what’s gonna make this deal work.

That’s one of the elements of it. Taking HBO direct to the consumer business to a different level, I think can be a very powerful opportunity as well. There are a lot of opportunities. There’s an amazing IP library within Warner Brothers, how can you put that to work and create something special with a distribution business? It’s not a one trick pony, it’s not all advertising. HBO, I still believe, is one of the premium video assets in the business right now, and comparable to Netflix, and I’m anxious to kind of move the direct-to-consumer platforms as aggressively as possible.

It looks like the map of the media/distribution, where we’ve actually got one of these, does really well on recode.net, I’m sure you all have seen it, is gonna eventually be you, and Verizon, and then some combination of Google, Facebook, Apple, Amazon, sort of owning much of the media properties, which means you’re going to be competing directly against the Googles and Apples and Facebooks and Amazons of the world. How are you thinking about going toe to toe with Silicon Valley?

Well, I believe if you don’t create a pure, vertical, integrated capability — vertically integrated capability, from distribution all the way through content creation and advertising models — you’re gonna have a hard time competing with these guys. And the statistic we throw out, and since we announced this deal in November of 2016, the FANG market caps have gone up over one trillion dollars. You better figure out how to vertically integrate here if you want to compete with those players, so that’s what this is about, is building the capability to compete in a purely vertically integrated opportunity for the consumer.

How about culturally in terms of hiring, getting best I was gonna say best-of but that’s a terrible cliché really good engineers, other technical folks, who might be inclined to go work for an Amazon or an Apple or a Netflix. How do you get them to work for AT&T?

It’s hyper competitive. At AT&T, if you’re an engineer, software engineer, like Google, Apple, those are great opportunities, they’re fun opportunities, they’re great brands. If you want to go work on the first network being launched in the world that is software driven, that’s a big scale deal. This is something that is bigger than Amazon Cloud, this is a big, big deal. And AT&T is leading the charge, and our engineers are out front on this. If you want to work on things like that, that are global in nature, that change how telecommunications is done, AT&T is a great place. If you want to work on projects that change how video and premium is going to be distributed, we have hired a ton of people to work on our over-the-top product, DirecTV Now, we have some great people that we’ve hired here at ...

At PLA.

That pitch works. Yeah, absolutely, right here in LA we got a ton of them, and they’re doing great works. Really creative folks. Did you see when we had John Martin onstage in February and he complained about DirecTV?

I did see that. Did you talk to him about that? I can’t remember the verb he used, the adjective he used, but it wasn’t ...

It wasn’t flattering.

Wasn’t flattering.

Yeah. But no, we’re hiring great people, the advertising platform I told you, Brian Lesser has made some great hires on the advertising platform. So hiring great people has not proven to be a problem.

Let’s tiptoe into the recent events. What was your reaction when you were actually sued by the DOJ? What was that day like for you?

Well, it wasn’t a day, we saw it coming, and it was obvious that when Mr. Delrahim had been confirmed by the Senate that we were really close to having a deal done with DOJ, then all of a sudden those talks kinda came to a grinding halt. So we saw this coming. So it wasn’t like that day was a big wake-up.

Because there were a lot of folks I talked to and I guess you talk to smarter people than I do — who said,Well, he’s not actually gonna sue them, he’s not actually gonna sue to stop, but he’s gonna rattle a saber, he’s gonna try to extract some concession, he’s not actually gonna take this thing to court.”

Well I think that was proven to be incorrect assumption.

But you saw it coming, you were not shocked when you ...

Yeah, we expected it. We saw it coming, yeah. Look, you go into a transaction like this, you step into it, you hope you never have to litigate it, but you step into it with the expectation you may have to litigate, so you prepare. You prepare from the very beginning, you buy fire insurance for your house and you hope you never have to use it, but when you do, you’re glad you have it, right?

And you guys know your way around Washington, you know your way around regulatory agencies. How did the Michael Cohen thing happen? How did you end up paying Michael Cohen?

I don’t have much to add other than the statement that I put out that said, “What a big mistake.” President Trump came into office and nobody knew the guy and the staff he was putting around him, the man, and so our folks in D.C. had this guy approach them and thought, “Well, this will be an interesting way to at least get some insight into the administration.” Bad mistake.

Bad mistake because it looked bad or because you didn’t get information, or both?

What degrees do you want to get into? It was just a bad mistake.

By the way, there’s a less awkwardly gross version of that that happens all the time, where either through lawyers oryou know this much better than I do where you do pay people for information, and maybe it’s people ... Maybe in the light of day it looks a little more unpleasant, but it is a way of doing business.

I don’t know how else to say it.

You’re not gonna do it again.

Not a very good ...

Not gonna hire Roseanne Barr, not gonna work with Michael Cohen again.

Was a bad mistake, Peter.

I’ve asked you about this before but I don’t think in public: You made a speech about Black Lives Matter, literally about the fact that you had an African-American friend and you had a talk with him, you didn’t realize the sort of day-to-day indignity and worse that he suffers. You made that in front of your employees when? 2016?

Yeah, that was fall of 2016.

And you weren’t streaming it live on the internet, but it ended up on Youtube, it wasn’t in a private forum.

It was an employee setting, and it was literally supposed to be a family conversation, right, and these things have cameras on ‘em now, and so literally I made the little talk, I think it was 11, 12 minutes.

But it wasn’t off the cuff, it was a speech you gave.

I had put a lot of thought into the comments, I really had, I was very deliberate about what I wanted to say. And look, it was a bad time, you remember what was going on, Ferguson, Missouri, was goin’ on, the situation up in Minnesota and Louisiana, in Dallas. Two weeks before I gave this talk, they had five police officers killed in Dallas. And we just had all of these activities going on and some amazing racial tension, and my view was none of our political leaders were stepping up in a way that gave context to our people. And my employees were struggling with this, and I was feeling tension among my employee base, and I said, “I need to talk to this,” and I had the conversation with literally one of my best friends, and he gave me some context, said it was just, “Wow, I’m so embarrassed.”

He told me some things that he had gone through as a kid growing up in Louisiana, the first child to go to an integrated school, an African-American in Louisiana, you can imagine what he experienced. And I said, “Man, you’re just giving me context,” and I went and talked to my people about, look, I don’t know where you are on the spectrum, you may think the police need to crack down, or you may say, “No, these police need to be brought under control,” and I said, “I don’t know where you are, but I understand if you’re an African-American, how you view this.” And I gave them that perspective, and it was received very, very well by my employee base across the whole spectrum of our company. I left there after this little 11-minute talk, I got in the car, and my smartphone was blowing up. An individual had already posted it on Youtube and it had gone viral rather quickly.

But I’m glad I did it, I’m actually pleased that it went viral, I think it was a good message that served ...

What did people outside the company tell you about that? Did you get reaction outside the company?

I got mixed ... As you can guess, I got some negative reaction, but I will tell you it was literally 2 percent negative, 98 percent very, very positive. And even thankful to a certain degree.

Have people been asking you to expound on that, to talk more about that? You said things were bad in the summer of 2016, they haven’t really gotten a lot better, right? We got Nazis marching in the street. Is there a reason you’re not making more of those speeches?

I didn’t make that speech to the general public, I made it to my employees. I still talk to my employees at length about this topic, and there are a number of activities and innovations within the company on how people are engaging in this topic, and basically what this did, it wasn’t that profound what I had to say, it literally was not that profound.

In an ideal world it would not be profound to say that you should not discriminate against black people. They’ve had a historically bad experience in the United States. But that is considered controversial in parts of this world.

Well, I will tell you the effect that it had inside AT&T was it was the CEO gave every employee a license to get out and talk about this. Go talk to that individual about what they’re experiencing. Go understand where they stand. It initiated a number of conversations and even with my peers, other CEOs, on this topic. And it was kinda like this big ugly issue that everybody just kinda kept under a rug and nobody wanted to really talk about it because it’s awkward and it was uncomfortable and it wasn’t very pleasant. All of a sudden, people are just talking about it and putting it out on the table and discussing it. That could be nothing but helpful, in my view.

Just leave it there. Well actually, let’s not leave it there, let’s ask you guys if you have questions for Randall. I’m sure you do.

Alex Sherman: Alex Sherman with CNBC. Randall, two quick questions for you. First one is, if Judge Leon rules you can’t buy Time Warner, what’s plan B?

I don’t even wanna go there. Anything around the trial, the judge has asked us to be very cautious. And as you can imagine, that answer might have implications to how people think about the deal. So, just right now, we’re focused on winning this thing, and that’s where we are. So I don’t even wanna go down that path.

Alex Sherman: Second one is, you are not allowed to buy T-Mobile, Sprint and T-Mobile now coming together. Do you think that deal should pass as is with no divestitures?

I’m not taking any public position. People say, “Well if he comes out and he says he supports it, that means that it must be anti-competitive. Because why would he want it? If he goes against it, that means it must be pro-competitive.” So we gotta let it go.

Look, I think they have a tough hill to climb, I mean, it’s a classic horizontal merger where you’re taking a competitor out of the marketplace. But it is a very different marketplace today and there are a number of competitors out there in this space. A new competitor’s coming into it every day, so it will probably get a different review than what our deal with T-Mobile received. But power to them, that they get it done.

Cid Wilson: Hi, Cid Wilson, I’m president and CEO for the Hispanic Association on Corporate Responsibility in Washington. Let me just say real quickly that your speech was probably one of the best speeches I’ve ever heard a CEO give to his own employees when you gave that speech two years ago. So, thank you.

My question is, what can Silicon Valley and the tech industry learn about AT&T’s diversity and inclusion practices? Because it seems that we hear from Silicon Valley that, “We can’t find qualified blacks, Latinos, women, and other underrepresented groups.” But AT&T, you hire people in tech, you hire people in engineering, and you seem to not have a problem with this. What is it that AT&T is doing right that Silicon Valley can learn from you?

It’s priority. I mean, just like anything else, is it a priority? And do you want your employee base, your executive base, your board, do you want that to reflect the communities in the markets that you serve? I don’t think you can be successful if you don’t reflect the markets you serve. And so, I’m gonna work backwards at that stack I just gave you.

I believe it has to start with the board level. If you don’t make it right at the board level and your board doesn’t reflect the composition of the markets you serve, it’s not gonna filter its way down. So you start at the board and you move to the executive team and you just keep working this and you keep looking for that talent, and you have to go compete for that talent to bring it in. But until you get it at the top, until you get it right at the top, you’re not gonna get it right at the bottom.

Cid Wilson: Thanks.

Thank you.

Rob Grizzard: Hey Randall, Rob Grizzard, good to see you. On the question of sports rights, I think this sort of is doing its thing, I’m involved with the Seattle baseball team and we’re actually partners with you, and you guys have been great partners. But you’re kind of sub-scaling in sports, I guess you would say. And if your merger goes through, you obviously get to be a massive scale, or much greater scale, let’s say. How do you see sports rights in particular, given the complexities, the fact the leads themselves go over the top, obviously Disney’s making a big play with BAMTech. How important is sports gonna be going forward, assuming for the sake of this discussion that the merger goes through? And what kind of role do you see that playing in your content work?

I just think sports is a very important element to have in a portfolio of products that you take to market. You target specific audiences with sports and as you think about where this thing goes in the future, and we are all in, that video consumption is moving to the world of mobile. It’s going there, and it’s going there fast. I still remember, just three or four years ago, people saying, “You really think somebody is going to watch long-form content in one of these devices?” And people used to ... Yes, they do, and they are. And they’re doing it at scale. They’re doing it a lot. And sports is one where they said, “It’s live, and live is more important and more valuable in this world than anything else.” So news and sports, we think, are really, really critical. They have a full well-rounded portfolio of content that you’re bringing to your customers.

You think sports rights fees continue to climb? Or you think we’ve tapped that as sort of the ... One of the audiences is falling off, people aren’t paying for these big bundles and subsidizing sports if they’re not watching it.

I don’t think you can put them all in the same basket and say sports rights in general. For example, I think the NBA is doing an amazing job. And the NBA’s ratings continue to go higher and higher. And there’s something about the NBA that I think is really unique. People say it has a very good demographic. It’s a much younger demographic. But I think the thing the NBA has gotten right is you can watch an NBA playoff game in about two hours and it’s over and it’s done, all right? That’s very important,to the new demographic, particularly millennial populations, and so I think that they ... four and five hours of sporting events capturing somebody’s attention, multiple games, multiple weeks in the year, I think those are gonna be harder for those models to succeed. And I think, what sports in general I hope does is begins to model what the NBA has done. And how do you shrink this thing down to a more bite-sized form of entertainment. So I think sports is gonna be important. But I think they’re all gonna be changing in the next few years.

Okay. Jon.

Jon Fortt: Hi, Jon Fortt from CNBC.

Hi, Jon.

Jon Fortt: The smartphone market unit growth, particularly the premium end, has pretty much evaporated and interestingly Apple is now moving into services, moving into content. You guys are in services and in content, what is the value today of the strategic relationship that you have with Apple versus what it was when Cingular became the first carrier to carry the iPhone.

That’s a long time ago, that’s 11 years ago, man.

Jon Fortt: Yeah, that’s a long time.

Randall Stephenson: Man, the world has changed a lot since then. Back then, as you know, for a handful of years it was an exclusive arrangement. And today, look, the iPhone makes up the lion’s share of our smartphone customer base and so, Apple and the iPhone are very important partner to AT&T.

Jon Fortt: They just accused you of colluding with Verizon, right?

Who did?

Jon Fortt: Apple.

No.

Jon Fortt: From the DOJ, right?

That’s an issue that’s been out there for the whole industry globally. It’s not a AT&T and Verizon ...

Jon Fortt: That’s standard behavior.

Okay, that’s a global issue. But anyway, the relationship is an important one to us and it will be for a long time. They continue to innovate some great products, watches, iPads, and we distribute all their products throughout all of our retail and our online presences. So it’s been critical for a long time and I see it being critical as we go forward. It’s a huge part of our customer base.

Jon Fortt: Are they becoming more of a competitor, though, at the same time with the iPhone upgrade program? Again, in content, there are small players, especially as James Murdoch lays it out, but they seem to be moving into areas that had traditionally been AT&T areas.

I think it’d be hard for us, Jon, to identify anybody in the world of tech that you couldn’t say that same thing about. Whether it be Facebook, whether it be Google, I can go to the whole ... Amazon, I mean, Amazon, the Echo, you know, that has telecom capabilities in it. And so this is just the world we live in and you’re gonna compete with these players at some levels, and at other levels you’re gonna be major vendor, supplier and partner relationships. That’s just the nature of it. I think that gets even more pervasive over time with all the tech players.

Crawford Del Prete: Sure, Crawford Del Prete, IDC. Hi Randall, congratulations on the transformation of AT&T. We see things accelerate. Can you talk a little bit about where international expansion fits in this new world in terms of the core business that you’ve operated? And I understand content internationally is a very different business ,but for the core business, does that become a different priority when you think about how the world is becoming more connected?

Yeah, I think about it this way. As the delivery platform for media moves from a satellite dish installed on a home to a software client downloaded by the customer on their device, that changes everything. I mean, you still have content relationships and so forth, you have to enter into but that begins to change everything. It changes how you think about moving into the movie distribution business in Mexico where we have a rather large wireless presence that’s doing very well. Download a client, you have content you can distribute, that’s really important.

Now, what happens when you actually, lets say the Time Warner gets approved, and you own all the Time Warner content and you can begin to distribute that to these clients and these international markets. You begin to conceive differently of international than you have historically. Think about HBO, and HBO, their over the top client. There are a lot of complex relationships they have with distributors around the world, but wouldn’t you like to have a direct to consumer relationship with the HBO content directly to the consumer? I think that could become very exciting as well. And so, it opens up a lot of different opportunities for us that would’ve been more difficult in the old world than it will be in the new world.

Crawford Del Prete: Thank you very much.

Thank you.

Randall, this is great, thank you. Thank you for coming. Appreciate it.

Thank you. It’s a busy week.

This article originally appeared on Recode.net.