What: AT&T and The Chernin Group have spent around US $500 million to create a new venture focused on acquiring, investing in and launching online video and OTT video services. The initiative´s main goal is to invest in advertising and subscription VOD channels in addition to streaming services which will be ad-supported in some cases and subscription-based in others.
Why it matters: Niche online programming could lead TV operators to compete directly with streaming services in a near future.
AT&T along with The Chernin Group, which manages and invests in media businesses around the world, have announced the formation of a venture to acquire, invest in and launch over-the-top (OTT) video services. Both companies have jointly invested over US $500 million in funding to the venture.
This association positions AT&T and The Chernin Group to take advantage of the rapid growth of online video and OTT video services, with each party bringing significant and complementary strengths. The strategic goal of this initiative will be to invest in advertising and subscription VOD channels as well as streaming services. Some of these services will be ad-supported, while others will be subscription-based.
On one hand, the Chernin Group contributed its majority stake in Crunchyroll, a subscription video on demand service, to the new venture. Crunchyroll , a service for Japanese anime content in the US, offers anime fans ad-supported episodes as well as a subscription tier. Subscribers can watch episodes of their favorite anime shows through a variety of apps for mobile and connected devices. Crunchyroll plans to expand into other content niches as well and also highlights how content is oftentimes much cheaper than the TV shows Netflix and Amazon are competing for, while still highly valuable to certain audiences.The same could be done with domestic content that hasn’t gotten enough traction on cable. Audiences could include Spanish-speaking viewers or other minorities underserved by traditional broadcast programming.
On the other hand, AT&T’s network resources bring greater opportunities for this alliance to create compelling offerings for consumers. AT&T has invested more than US $119 billion in the United States over the last six years to stay ahead of the consumer demand for wireless and wireline broadband data consumption, with more than 50% of global Internet traffic driven by video. The company has over 110 million wireless subscribers and more than 16 million total broadband subscribers. AT&T operates its own TV service as part of its Uverse offering. However, Uverse network still isn’t available in all markets, and it often competes with TV and triple-play offerings from Comcast and other cable companies. With niche video services, it could reach every consumer, regardless of their broadband provider, and even use its wireless service for marketing and payment services.
“AT&T and The Chernin Group are combining our skill sets to address the growing consumer demand for accessing content how and when they want it. Combining our expertise in network infrastructure, mobile, broadband and video with The Chernin Group’s management and expertise in content, distribution, and monetization models in online video creates the opportunity for us to develop a compelling offering in the OTT space,” said John Stankey, Chief Strategy Officer at AT&T.
“joining forces with AT&T only further underscores our strategic commitment in online video area as operators, investors and programmers. Consumers are increasingly viewing video content on their phones, tablets, computers, game consoles and connected TVs on mobile and broadband networks. AT&T’s massive reach on those platforms across mobile and broadband and their commitment to the online video space make them the perfect fit for this venture with us,” said Peter Chernin, Chairman and CEO, The Chernin Group.
TV operators may one day move beyond their physical footprint and compete directly with streaming services.They may be looking to the niche online programming to make that happen.
According to gigaom sources, as AT&T, DirecTV has also been investigating niche online programming, and there have been rumors that Comcast is looking to launch niche online offerings as well.