AT&T Betting Big on OTT to ‘Bend the Curve’ of TV & Video Costs

Dec 11, 2018

Kelly Potter

Kelly Potter

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“AT&T is placing a massive bet on OTT (over-the-top), streaming and direct-to-consumer products as it looks to “bend the cost curve” of its broadening blend of TV and video products over the next two to three years,” explains a top company executive in an analyst meeting last Thursday in New York.

OTT (over-the-top) is the “term used for the delivery of film and TV content via the internet, without requiring users to subscribe to a traditional cable or satellite pay-TV service.”

AT&T Inc. outlined those strategies as part of its long-term plan while also announcing the development of a three-tiered SVoD product that’s expected to debut in Q4 2019 and will lean heavily on content from its newly formed WarnerMedia unit and compete head-on with OTT video products from Netflix, Amazon, and the ever anticipated content from Disney+.

A big focus is to get AT&T’s OTT platform “stabilized” in a way that delivers profitability, AT&T chairman and CEO Randall Stephenson said, noting later that pricing moves and a more extensive use of targeted advertising will both factor into that plan.

The challenge is to fix a struggling pay-TV business. “When you’re coming from double-digit declines, flat feels like a good place,” Stephenson said. “We’ve got to get through flat to get to positive in 2020, and that’s our target.” 

CEO Randall Stephenson

AT&T has been trying to remedy the situation with skinny bundle streaming services such as DirecTV Now and WatchTV and has likewise “retooled our OTT profitability” in terms of how those services are being priced, packaged and promoted, John Donovan, CEO of AT&T Communications, said. “OTT profitability is a very important part of what we’re going to do,” he said.

That effort also includes a new Android TV-powered OTT thin-client device that AT&T has been testing to help it deliver the company’s bigger, premium-level packages.

Donovan said AT&T has deployed about 6,000 of those boxes so far, and is being cautious on how rapidly it ramps up the distribution as it irons out operations and confirms final pricing.

However, the plan is raise the percentage of premium pay-TV customers that will take the self-install route with the new thin-client OTT box in the early part of 2019, he said.

While AT&T expects that device to help drive down some of its upfront operational costs, the company also hopes to reduce programming costs as it re-examines its distribution deals and develops slimmed-down tailored to specific viewing profiles, and teams those products with targeted advertising from its new Xandr division.

The front end used for that thin-client device and the retail devices that will support AT&T’s various streaming services will be unified, and they’ll all run off a common back-end architecture. AT&T expects that the front-end piece will enable the company to make swift changes, updates and upgrades.

Kelly Potter

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