Verizon vs. AT&T: A tale of two media investments

Telecom giants AT&T and Verizon are both pursuing a strategy that marries content and distribution. But they are taking two different approaches and, so far, seeing radically different results.

Verizon admitted Tuesday that its media arm, Oath — which consists of AOL, HuffPost, Yahoo and other digital brands — is struggling to drive revenue. Meanwhile, AT&T said Wednesday that WarnerMedia, its media division that was formerly called Time Warner, is flourishing.

Why it matters: Oath is driven by digital ad income, whereas WarnerMedia is driven by revenue from streaming subscriptions, its studio business and its digitally-sold television ads business. The digital ad business continues to be a tough marketplace for media companies competing with tech giants like Google and Facebook, whereas those tech giants have yet to dominate subscription streaming, movies, and digitally-sold TV ads.

What they're saying:

• Verizon conceded in its earnings press release that it expects Oath revenues "to be relatively flat" in the near-term and "does not expect to meet the previous target of $10 billion in Oath revenues by 2020." Oath was down 6.9% in revenue year over year.
• AT&T CFO John Stephens told investors on a call Wednesday that higher subscription revenues at HBO and Turner as well as increased TV licensing revenues at Warner Bros. helped drive WarnerMedia's success. WarnerMedia's revenue was up 6.5% year over year.

Between the lines: While this was only the first full quarter of earnings reported for WarnerMedia under its new parent company, all signs point to optimism from investors.

• Oath, on the other, hand, is facing a brutal outlook from both investors and media experts. Many, including Former Yahoo CFO Ken Goldman, have suggested that Verizon should spin off Oath.
• The company has lost the majority of its top executives since it was acquired last year, including CEO Tim Armstrong. As a result, Verizon says it's focusing its future investments on building out its national 5G network.

Bottom line: Even in an Internet age, TV content still has value, regardless of which screens are used to view it. On the other hand, Internet media continues to be a tough sale, even when you own the pipe.

Go deeper:

• AT&T posts strong earnings with help from WarnerMedia
• Verizon suggests its media business is struggling
• Verizon's sky high 5G ambitions