OPINION AND ORDER In this securities class action, Plaintiffs accuse AT&T Inc. and its senior management of misleading shareholders about the performance and potential of AT&T’s video streaming service, DirecTV Now (DTVN). From September 21, 2016, through January 30, 2019, Defendants allegedly trumpeted subscriber growth without disclosing that the figures were propped up by unsustainable promotions and fraudulent sales practices, which rendered the subscriber base susceptible to high rates of customer attrition (or “churn”) and low or nonexistent profit margins. Plaintiffs also allege that Defendants misled investors about the potential for DTVN to compensate for losses in traditional satellite TV and failed to disclose technical problems that plagued the digital platform during its initial launch, all in violation of federal securities laws. Substantially similar allegations of misstatements and omissions underlie Plaintiffs’ claims that Defendants’ registration statement and prospectus, which were issued in connection with AT&T’s acquisition of Time Warner, Inc., were materially misleading. Although Plaintiffs offer a smorgasbord of what appears to be every statement that Defendants ever made about DTVN during the class period, they have failed to plead material misstatements or omissions of fact or other deceptive conduct, which is fatal to all seven counts alleged in the amended complaint; as to the Exchange Act claims, Plaintiffs also failed to plead scienter. Defendants’ motion to dismiss all claims is GRANTED; Plaintiffs may move for leave to amend if they can allege additional facts that could support a plausible inference that DTVN was, in fact, an entirely unprofitable product and that the alleged fraudulent sales practices were widespread and known to AT&T’s executives. BACKGROUND Plaintiffs bring this action on behalf of all persons who purchased publicly traded AT&T shares during the period from September 21, 2016, through January 30, 2019 (“Class Period”), and all Time Warner shareholders who received AT&T stock as a result of AT&T’s acquisition of Time Warner.1 Am. Compl. (Dkt. 79) 3. I. DTVN and the Time Warner Acquisition AT&T is a telecommunications and media company. Id. 94. During the relevant period, it was organized into four business segments: (i) Business Solutions, (ii) Entertainment, (iii) Consumer Mobility, and (iv) International. Id. 95. The Entertainment segment housed a variety of services, including video, internet, and advertising. Id. 96. On July 24, 2015, AT&T expanded its video business by acquiring a satellite-based TV provider, the DirecTV Group, Inc. (“DirecTV”), for $67.1 billion. Id.
97-98. In 2016, the Entertainment segment represented AT&T’s second largest segment and amounted to 32 percent of AT&T’s business. Id. 95. The satellite TV market, however, was in long-term decline as consumers increasingly “cut the cord.” Id. 100. In part because of that trend, in March 2016 AT&T announced a new internet-based TV service known as DTVN. Id. 100. At the time, DTVN was touted as a unique “hybrid” product that offered both live programming and on-demand content, without the need for physical installation of satellites or other equipment. Id.
