AT&T/WarnerMedia’s new streaming service, HBO Max, boldly launched last week without the app support of the two biggest streaming device ecosystems, Roku and Amazon Fire TV, and it doesn’t appear that the telecom is close to a deal to integrate its app into either platform. 

Engaging in a Q&A with The Verge, Tony Goncalves, the longtime DirecTV executive, current CEO of AT&T’s Otter Media division, and executive leader in the development of HBO Max, conceded that it is “really, really important” for HBO Max to be available on platforms that consumers use to access new networks. 

Also read: HBO Max Launches Without App Support for Roku and Amazon Fire TV

But … “We’re just starting from a very, very different place,” he said. “We have 30-plus million existing subscribers that have already gone in their pocket and voted to subscribe to a product, and we’re making that product better. We think the value prop is there. We just want to be treated fairly.”

AT&T’s legacy HBO Now app has been a lynchpin property in the development over the last five years of Amazon Prime Video Channels, Amazon’s market that repackages streaming services and funnels them through the company’s app. Roku has copied that “Channels” strategy, and markets HBO Now the same way. Now that HBO Now its 30 million subscribers have evolved into HBO Max, AT&T wants to take the whole enterprise truly direct-to-consumer and is no longer willing to let its content—and the requisite data—be dis-aggregate through Roku and Amazon apps.

Notably, Netflix, Hulu and Disney Plus are all available on Roku and Amazon directly via their own respective apps. 

“Disney Plus and Netflix and Hulu and these other apps are on those platforms. There’s a certain business model that exists. We just want the same one. I’m hopeful that, ultimately, we’ll get there, and we’ll get there with the consumer in mind. But we just didn’t get there on day one,” Goncalves said. 

Roku and Amazon control more than two thirds of the U.S. connected TV market. And the lack of support for these two platforms is souring the view of the HBO Max launch in the eyes of many analysts, who already view the service’s value proposition as being a bit too complicated. 

Also read: AT&T’s HBO Max Dilemma: Why Complicated Distribution Dynamics Mean a Bad Deal for Some Current Customers

"HBO Max's launch has thus far been notably less smooth than the launch of Disney Plus, due to a variety of factors, including confusing branding, uncertainty about how to get the product, and limitations on how consumers can actually watch the product, particularly on television," wrote Evercore ISI's Vijay Jayant in a note to investors. 

“We believe AT&T’s dispute with Amazon comes down to one thing: data,” Jayant added. “AT&T wants Fire users who open HBO Max to be essentially transferred to the HBO platform, so that HBO captures all the data about the customer’s usage, improving the ability to target ads in other parts of the WarnerMedia universe. Amazon, however, wants to keep as much of that data as possible in house.”

Jayant believes the Roku dispute, meanwhile, is primarily centered around advertising.

”While HBO Max doesn’t currently have ads, AT&T does expect to launch an ad-supported version, likely next year, and Roku will want to benefit from that advertising revenue,” the analyst wrote. "We expect this dispute to eventually be resolved, since neither AT&T nor Roku benefits from not having HBO Max available on Roku devices.”

AT&T has shuffled the executive ranks of its video business as it prepares to launch a new subscription streaming service next year under the WarnerMedia banner.

Former Showtime and NBCUniversal top executive Bob Greenblatt, who joined AT&T in March as head of the company’s entertainment and direct-to-consumer operations, will now be in charge of digital production unit Otter Media.

Otter produces digital platforms including Fullscreen, Crunchyroll and Rooster Teeth. And AT&T is looking to integrate these properties with its broader umbrella of WarnerMedia content. 

Veteran DirecTV entertainment executive Tony Goncalves, who has been serving as CEO of Otter, will now be in charge of developing the new WarnerMedia OTT platform, reporting to Greenblatt.

Also in the mix is Otter Media COO Andy Forrsell, the former Hulu CEO who joined the company in 2015. He’ll report to Goncalves.

Meanwhile, Brad Bentley, whose roots at DirecTV span two decades, will depart his role as executive VP and general manager of direct to consumer development.

Kevin Reilly, who serves as president of TBS, TNT and TruTV, as well as the top content exec for the new streaming service, will keep reporting to Greenblatt.

“As we continue to build out our new streaming business and realign WarnerMedia functions, this step will facilitate further scale and focus in our efforts to offer customers an engaging and compelling product experience,” said WarnerMedia CEO John Stankey in a statement. “I’m confident that with Tony and Andy leading our product and operations, Kevin and HBO’s Casey Bloys guiding our content strategy, and with Bob at the helm, we have a formidable team creating a curated streaming service with a winning combination of content and features. I also want to thank Brad for his leadership in bringing the project to this point in record time.”

Tony Goncalves has been named CEO of Otter Media, the OTT joint venture of The Chernin Group and AT&T formed in 2014.

RELATED: AT&T, Chernin Group To Build OTT Video Services

Goncalves most recently was CEO, Digital Brands for AT&T, overseeing the Otter Media relationship with The Chernin Group, and leading the strategy for DirecTV Now, the OTT TV service that AT&T launched in November 2016. Prior to that, Goncalves served in number of exec roles at DirecTV, which merged with AT&T in July 2015.

RELATED: AT&T Adds 368,000 DirecTV Now Subs in Q4

Talks about having Goncalves join Otter Media full-time started about six months ago, according to a statement from Peter Chernin, chairman of Otter Media and CEO of The Chernin Group, which is Otter Media’s majority owner.

Sarah Harden had been serving as president at Otter Media before being named CEO of Hello Sunshine, Reese Witherspoon’s production company, full-time last month. The last person to serve as CEO at Otter Media was Virasb Vahidi, who left in 2015.

Hello Sunshine is also part of Otter Media’s portfolio. Others in that portfolio include Ellation, Fullscreen, Rooster Teeth, Crunchyroll, VRV, and Gunpowder Sky. Otter Media estimated that brands in its portfolio engages with more than 90 million unique viewers per month, and generated a combined 100 billion video views in 2017.

“Tony has been our partner on Otter Media for almost four years, and during that time, it was evident that he is a thoughtful, strategic executive who is hugely passionate about furthering the growth of one of the premiere digital media companies,” Chernin said, in a statement. “Over the last six months, we started discussing having Tony join Otter full-time, and we are delighted that he has agreed to assume the role of CEO. We know he will apply his formidable talents to help us take this company to the next level.”

Related > Viewer Watch 2017: Download the Complete Report

With new business models proliferating almost as fast as new consumer-electronics devices at this year’s CES, TV executives are recalling 2016 as a year of landmark changes that will produce even more profound developments in 2017.

“In the last year, there has been more change in the video business than we saw in probably the past five years,” said Matthew Strauss, executive vice president and general manager of video and entertainment services for Comcast Cable. “We’re just continuing to find the competitive landscape shifting. There are more services being delivered over the top to consumers. There is the growth and proliferation of Internet-connected TV devices like Roku, Apple TV or Amazon Fire. And you are also seeing new services that are delivering bundled over the top channels like Sling TV, Sony’s PlayStation Vue and DirecTV Now.”

In response, programmers and operators have introduced a flurry of new products. “In terms of video, this has been one of the biggest for Cox in all the years I’ve been here,” Steve Necessary, executive vice president of product development and management at Cox Communications, said.

Less obviously, operators and programmers continue to make massive investments in their technology infrastructures with important implications for their offerings in 2017 and beyond.

“As a company, we are investing and positioning content to be consumed on more and more platforms every day,” Discovery Communications chief technology officer John Honeycutt said, stressing that the programmer is rapidly deploying new cloud and software-based infrastructures so it can adapt to consumer needs and quickly roll out new services. “We are in the middle of a revolution in our supply chain.”

Related: Old Controversies and New Businesses

DIGITAL-FIRST REALITY

Much of this reflects longstanding changes in consumer behavior and the underlying economics of the TV, digital and media industries.

Vincent Letang, executive vice president of global market intelligence at Magna, said 2016 was the first year digital advertising exceeded total TV advertising in the U.S., garnering 39% of the total ad spend versus 37.4% for TV. Digital advertising is set to exceed total TV advertising worldwide for the first time in 2017, he added.

“We are forecasting that in five years, digital will grow to 56.0% of total advertising [in 2021 in the U.S.] while TV will plateau at 29.9%,” he said. Meanwhile, content creators and distributors are following the flow of money into digital media, fueling rapid growth in consumption of TV shows on mobile devices, computers and TVs connected to the Internet.

“The cliché of how consumers ‘want my content when I want it, where I want it and how I want it,’ is now a truism,” Mike Vorhaus, president of Magid Advisors at Frank N. Magid Associates, said. “Just five years ago, it was hard to find a lot of content. But now, in 2017, I’m really the captain of my media ship in a way that was not true in the past.”

Given ongoing rapid growth in the usage of mobile and connected TVs, it is difficult to call digital video “mature.” But researchers stress that the tectonic changes in how video is consumed and delivered have already made digital media a central part of the TV business.

“After four or five years of talking about alternative ways to access video and watching significant growth in its usage, we are now at a point where it is pretty much established,” Howard Horowitz, president and founder of Horowitz Research, said. “It’s not a fly in the ointment, but part of the business. Digital self-managed access to video content is with us and mostly that is a good thing for all the players.”

DISRUPTIVE GAINS

Others agree. After ticking off a long list of new products and initiatives designed to realign their offerings with newer consumer behavior, Comcast’s Strauss said: “Our third-quarter video results were the best we’ve had in 10 years. We added 32,000 video customers, which is an 80,000 improvement year over year. And if you look at the last 12 months, we are video-positive.”

Some programmers have been buffeted by the changes, which have hurt ratings, but those that have aggressively moved to capitalize on the newer delivery platforms are pleased with the results.

Bernadette Aulestia, executive vice president of worldwide distribution for HBO, noted that the launch of the OTT service HBO Now has allowed the programmer to tap into new markets and see healthy growth in the overall business. “Less than 1% of [the OTT] HBO Now subscribers are coming from our linear multichannel subscribers,” she said.

Executives from Dish Network and AT&T cited similar experiences with their respective OTT channel bundles, Sling TV and DirecTV Now, which are designed in part to tap into viewers outside of the pay TV ecosystem.

“There are about 20 million households in the U.S. that are either not engaged with pay TV or have opted to leave the pay TV ecosystems,” Tony Goncalves, senior vice president of strategy and business development for AT&T Entertainment Group, said.

That doesn’t mean that the industry can sit back and pretend it will be business as usual in 2017.

An acceleration in the decline in pay TV subscribers has caused Magna to revise its estimates of pay TV subscribers downward. There is also a great deal of uncertainty about the ad market.

These trends raise important questions about the changing use of video on various platforms — traditional TV, mobile, Internet-connected TVs, set-top boxes and other technologies. How these trends will impact the health of the industry and the kind of products that get launched in 2017 is the subject of the next story.

Related:INTX 2016: AT&T Strives for 'Digital Bundle'

Some 10 months after closing its $48.5 billion purchase of DirecTV, AT&T has introduced a flurry of products aimed at exploiting its position as the largest pay TV service provider and the second-largest wireless communications company in the U.S. It’s combining video, broadband and wireless offerings in a variety of packages, including deep discounts for wireless service, mobile video and unlimited data plans. It has also raised some eyebrows with a plan to migrate U-verse TV subscribers to DirecTV, a move some see as a factor in the steep subscriber declines in its wireline business.

Most recently, AT&T formed a joint venture with former Fox chief Peter Chernin called Otter Media for long- and short-form content with three over-the-top services — DirecTV Now, DirecTV Mobile and DirecTV Preview — expected to debut later this year. It’s beginning to seem like investors will need a scorecard just to keep track of the latest movements in the phone company’s lineup.

AT&T Entertainment Services senior vice president of strategy and business development Tony Goncalves spoke with Multichannel News senior finance editor Mike Farrell about AT&T’s strategic direction and plans to navigate the evolving world of voice, video and data. Edited highlights follow.

MCN:It seems that DirecTV’s role in AT&T Entertainment has changed even in the short time since the merger was completed. Can you talk about that?

Tony Goncalves: I think, at a macro level, there are shifts in the value chain happening. The definition of a distributor is changing, but at the macro level our video strategy is pretty much intact. We were pretty overt, we were moving rather aggressively from a satellite-only and an IPTV-only video provider to one that would provide high-quality video to consumers, regardless of the connection. The OTT announcement we made earlier last month — ubiquitous delivery of video content across managed and unmanaged networks is our approach. One thing we bring to the table for both the consumer and the industry is the fact that we’re a network and connectivity company at heart. So we should be able to move the bits pretty efficiently between the origination and the end point for the consumer.

MCN:Right after the deal closed, there was some really deep discounting for handsets and a push toward pairing video service with cellphone service. Now, you’re moving toward an OTT product. Was that always the intention or is it more of a reaction to market forces?

TG: The intention had always been to build from what we had as a unified company and create points of differentiation wherever you possibly could, with mobility clearly being an area where we could employ some differentiation. What you saw was an out of the gate, highly promotional kind of approach. And what you subsequently saw earlier this year was [combining] unlimited data when you combine AT&T mobility on DirecTV. The third prong was the announcements on OTT. Underlying all of that is a video platform that will ultimately be delivery-agnostic — managed and unmanaged networks, WiFi or LTE, IP or satellite. The intent has always been, you get to a point where the platform is flexible and nimble and expands beyond the 26 million households we’re in today.

MCN:Millennials supposedly don’t watch TV, they watch shows on whatever device they happen to have nearby. Is that what you’re doing with the OTT service? Is it the first step in a series of products that consumers will use as their life situations change?

TG: Our OTT strategy is two-pronged. On one side, it’s a catch-all type of product. There are folks that are leaving the ecosystem that really still value the bundle, and the bundle has just gotten a bit out of reach. Our DirecTV Now product is intended to be a product that folks who are leaving the ecosystem, yet still value the premium content, can subscribe to rather easily. It’s pay TV as an app. They can subscribe rather quickly and cancel rather quickly. But we’re investing less into those consumers because we’re not rolling trucks or putting set-top boxes into their homes. On the other side of what we announced on OTT, which is DirecTV Preview and the mobile-specific products, it is trying to pull in some of those “cord nevers” that tend to be younger and present them with premium content from the more premium services. Over time, yeah, we do believe that at a certain life stage, cord-nevers will make a decision to buy more. And we’re in a unique position if we do this right to be able to establish a relationship with those customers.

Related:AT&T Deals for Quickplay

MCN:You have been migrating U-verse TV customers over to DirecTV. Once that is complete, will you still have a wire into the home? Will U-verse wireline broadband still be important, or do you see that eventually moving to fixed wireless?

TG: Fixed-line broadband is very, very important to us. We’ve committed as part of the conditions of the merger to build 12.5 million fiber households. There is a tremendous amount of investment that is traveling down the fixed-line broadband path. As far as fixed wireless, we are deploying some fixed wireless, largely in rural areas. As mobile networks evolve and we get into this IP era, there will be an opportunity to unify the broadband approach. We haven’t been overly specific as to what our plans are there. But to answer your question very directly, fixed line is very, very important. We’re putting a lot of fiber in the ground and we don’t intend to pull back at all.

MCN:So there will always be a line into the house?

TG: Yeah. How that line gets there is definitely evolving. It used to be twisted-pair copper that went through a central office and got distributed, then it became fiber to the neighborhood and now we’re at fiber into the home. There will be what I call a collision of wireless and wireline at some point. It’s hard to predict when [and] to what extent we’ll use it. We’re going to do whatever is more cost-efficient and delivers the best experience to the consumer.

SIDEBAR: Streaming Meemies

Beginning in the fourth quarter of this year, AT&T will make streaming video available in three separate packages for consumers:

DirecTV Now: On-demand and live programming from most of the networks available on DirecTV, plus premium and add-on options

DirecTV Mobile: Mobile-first experience for premium video and made-for-digital content for smartphones, regardless of wireless service provider

DirecTV Preview: Free, ad-supported service featuring some of the quality programming available on DirecTV, including the AT&T Audience Network and millennial-focused content from Otter Media

Source: AT&T

SIDEBAR: Sub-Traction

DirecTV net new-subscriber growth has been on the rise in the past few quarters, just as AT&T’s U-verse customer base has declined sharply. (In thousands)

Q1 2015           Q2 2015             Q3 2015         Q4 2015        Q1 2016

DirecTV . . . . . . . . . .  60 . . . . . . . . (133) . . . . . . . . . 26 . . . . . . . . . 214 . . . . . . . . 328

AT&T U-Verse . . . . . 49 . . . . . . . . (23) . . . . . . . . . (92) . . . . . . . .(240) . . . . . .  (382)

Source: Company reports