AT&T Sets Sights on Another Streaming Service

Jeff Baumgartner
News Analysis
Jeff Baumgartner, Senior Editor, Light Reading

In the wake of its acquisition of Time Warner, AT&T plans to launch a new direct-to-consumer streaming service in the fourth quarter of 2019, labeling it in an 8-K filing as "another benefit" of the merger.

AT&T Inc. (NYSE: T) has not named the service or revealed pricing details, but the Internet-delivered offering "will serve as a complement to our existing businesses and help us to expand our reach by offering a new choice for entertainment with the WarnerMedia collection of films, television series, libraries, documentaries and animation loved by consumers around the world," AT&T said. (See FCC Gives DoJ a Boost in Appeal Against AT&T-Time Warner Merger.)

The would seemingly put it in the path of popular SVoD services from Netflix Inc. (Nasdaq: NFLX), Inc. (Nasdaq: AMZN) and Hulu LLC , and position it to tangle with Walt Disney Co. (NYSE: DIS) as The Mouse develops its own direct-to-consumer offering. AT&T's new offering would also arrive amid changing viewing habits -- consumers are increasingly severing tied with traditional pay-TV service providers and instead tapping into a broadening variety of OTT video options to build something that suits their individual tastes. Studios and programmers are also using OTT and direct-to-consumer models to reach audiences that have left the pay-TV fold.

AT&T said funding from the new offering will come via incremental efficiencies at WarnerMedia, the consolidation of resources from "sub-scale" direct-to-consumer efforts, as well as from "fallow library content" and technology reuse. Per the filing, AT&T also expects to defer some licensing revenues to later periods in the form of expected, increased customer subscription revenues from the new direct-to-consumer product.

The new direct-to-consumer product will join a growing list of them already launched by AT&T, including DirecTV Now and WatchTV, two multichannel service offerings that deliver live TV channel packages and VoD content. DirecTV also supports a cloud DVR service, while WatchTV serves as a sports-free skinny bundle that is offered for free to AT&T mobile subs and for $15 per month as a standalone service.

HBO, a key premium content property AT&T acquired from the Time Warner deal, also has its own direct-to-consumer service, called HBO Now.

According to a memo from WarnerMedia CEO John Stankey obtained by CNN, the proposed, new service "will start with HBO and the genre defining programming that viewers crave" and also package in content from Turner and Warner Bros.

According to CNN, Stankey also noted that WarnerMedia will balance its agreements with traditional distributors (satellite TV, telco TV and cable operators) with its standalone endeavors.

"While going direct-to-consumer gives us an additional opportunity to reach audiences that aren't part of a traditional subscription service, our wholesale relationships will continue to be an important distribution channel," the exec wrote.

— Jeff Baumgartner, Senior Editor, Light Reading

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