Seeking to calm the nerves of investors leery of debt and rising subscriber churn at satellite-TV service DirecTV (see Platforms, page 28), AT&T is laying out a plan to make its $84.5 billion purchase of Time Warner a necessary catalyst to compete with Netflix around the globe.
AT&T’s recently acquired WarnerMedia division will launch a broad-reaching streaming service, leveraging content from Warner Bros., Turner and HBO, in the fourth quarter of next year. At an investor day event, AT&T’s top executives didn’t announce a name for the new service, or any pricing. But they did describe three basic tiers.
The entry-level package will be focused on theatrical movies. There will be a more premium bundle including original shows along with blockbuster films. A third ultra-primo tier will add an extensive library of WarnerMedia content, plus licensed third-party content, to the other offerings.
“We understand that this product has to be good enough” to get viewers to spend money on it, WarnerMedia CEO John Stankey said.
The subscription over-the-top market is crowded, he acknowledged, but incumbents like Netflix will become vulnerable when WarnerMedia and The Walt Disney Co. — plotting a similarly ambitious direct-to-consumer launch — start withholding licensed movies and shows for their own platforms.
“Some of the incumbents should expect that their libraries are going to become a lot thinner,” Stankey said, adding that as much as 80% of viewing for the top SVOD services comes from licensed shows and movies.
AT&T also said it will earmark $12 billion of its increased cash flow next year for debt repayment.
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