U.S.telecom behemoth AT&T Inc. T is considering producing or acquiring content for its video services, including its Internet TV, which is due for launch in Jan 2016. The company plans to target customers who are not covered under traditional pay-TV services. An estimated 30 million households in the U.S do not subscribe to pay-TV services.
Combating Challenges
Earlier this year, AT&T completed its acquisition of DIRECTV to become the largest pay-TV provider in the U.S. With its combination of U-verse, DIRECTV’s satellite TV and all-fiber GigaPower Internet service, AT&T now has the operational flexibility to provide both traditional cable TV service as well as mobile video streaming service. This will allow the company to optimally cater to the needs of its customers by giving them an array of options to choose from, namely, traditional cable TV, IPTV and mobile TV streaming service. AT&T’s robust business initiatives are well set to make it a formidable force in the market against cable MSOs (multi service operators) like Comcast Corp. CMCSA and TV streaming service providers like Netflix Inc. NFLX.
However, AT&T lacks the large and diversified content library boasted by the likes of Netflix, Hulu and Comcast. The company now deems it essential to develop tailor-made, on-demand content aimed toward the growing young adult population (the Millennials), who comprise the largest chunk of the TV viewer base at present.
Recent Pacts
With an eye on developing content suited to the taste of the Millennials, AT&T, along with the Chernin Group,, entered into a joint venture to form Otter Media. In addition, the company has inked channel distribution deals with Viacom Inc. VIAB and A+E networks to beef up its channel portfolio. Moreover, DIRECTV has been involved in producing certain TV series for its viewers.
The Bottom Line
Although AT&T’s strategies are directed toward its broad base of video customers, it has Internet TV customers particularly on mind. Internet TV viewership is on the rise, with the growing popularity of mobiles and tablets. Other than service fees, Internet TV streaming providers also earn a considerable amount of revenue through advertisement. The telecom companies have a strategic advantage in providing such services compared to 3rd party providers such as Hulu or Netflix because they can optimally utilize their wireless networks for a seamless Internet TV experience. At the moment, it remains to be seen how AT&T’s offering stands against that of its rivals in the coming days.
AT&T presently carries a Zacks Rank #2 (Buy).
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