U.S.-based telecommunications giant AT&T and The Chernin Group, which produces and invests in media and entertainment, have announced that they will enter into a partnership to jointly pursue opportunities in the video-on-demand and streaming content sectors. The companies stated that together they will invest $500 million to acquire and launch such OTT services, which will have both ad-based and subscription-based business models. Further specifics of the deal were not provided, nor was the launch date specified. AT&T chief strategy officer John Stankey said, “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.” Peter Chernin, chairman and CEO of The Chernin Group, said, “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.”
Tarifica’s Take
The need to transcend the “dumb pipe” role applies to the fixed line sector as well as to the mobile. AT&T has been looking to gain traction in the video-content space for some time now; a previous attempt—also in partnership with The Chernin Group—to acquire Hulu last year failed when the video content provider’s parent companies chose to retain their shares in the business. This time, the two companies are evidently hoping that a large amount of ready money and a flexible attitude toward possible diverse acquisitions will enable them to make headway in the rapidly growing OTT video universe.
To this endeavor, AT&T can bring its large footprint (16 million broadband subscribers in 22 states) and high-speed networks. Simultaneously with this new partnership, the operator also announced that it will expand its “last-mile” fiber-to-the-home (FTTH) network to 100 more U.S. municipalities in 2014, include 21 major metropolitan areas such as San Francisco, Chicago and Cleveland. FTTH is intended to provide the broadband speeds that are optimal for the delivery of VOD and streaming video. This joint venture could allow AT&T to compete with large cable companies by offering increasingly popular kinds of non-traditional video entertainment to content-hungry customers.