AT&T to Invest in Video Streaming

By Gary Kim April 22, 2014

AT&T has partnered with The Chernin Group, which manages and invests in media businesses around the world, and invested in over the top streaming video services.  The partnership plans to acquire, invest in and launch over-the-top (OTT) video services.

The Chernin Group and AT&T have committed over $500 million in funding to the venture.

At one level, the move might be viewed as simply a search for revenue growth in a related applications business with proven customer demand and arguably huge revenue growth potential.

If AT&T already is in the subscription video business, and if online, over the top delivery is the substitute product of the future, AT&T would want to position to supply the new demand as its older business declines.

The move also is strategic in the sense that it allows AT&T to create new revenue streams “out of region.” Traditionally, fixed network service providers have operated in discrete territories with clear geographic boundaries.

That has meant service providers could sell products to customers who lived within those fixed boundaries. Over the top apps are different: they are not limited to use by people who live within a defined geographic area.

In one way, you might say the distinction is between the ability to sell products to “customers” and selling products to “anybody who lives within the United States, even if my network doesn’t reach them directly.”

Taking an over the top approach, AT&T in principle could reach every potential video entertainment viewer, not just those who live within its fixed network footprint.

In other words, AT&T could become Amazon, not remain a place-based retailer. That would be crucial for AT&T in the video entertainment business, as the company reaches only a fraction of U.S. homes, and video entertainment services arguably benefit from national scale.

Because telco TV is not ubiquitously offered, U.S. phone companies have about 10 percent market share, where cable TV companies have about 55 percent share, and satellite firms have close to 30 percent share.

By 2015, AT&T, for example, will be able to market to only about 33 million locations.

Verizon’s FiOS covers about 17.8 million homes, so the two telcos will pass about 51 million U.S. homes, by 2015, out of perhaps 145 million U.S. homes by 2015.

That implies video services coverage of about 35 percent of U.S. homes. Other telcos will sell telco TV as well, but collectively could only theoretically reach about 14.5 million homes, or so, by 2015, best case.

Even under the best of circumstances, it is unlikely U.S. telcos will be able to pass even 45 percent of U.S. homes by 2015.

An over the top capability breaks through those limitations.




Edited by Maurice Nagle

Contributing Editor

SHARE THIS ARTICLE
Related Articles

Consumer Privacy in the Digital Era: Three Trends to Watch

By: Special Guest    1/18/2018

Digital advertising has exploded in recent years, with the latest eMarketer data forecasting $83 billion in revenue this year and continued growth on …

Read More

CES 2018: Terabit Fiber - Closer Than We Think

By: Doug Mohney    1/17/2018

One of the biggest challenges for 5G and last mile 10 Gig deployments is not raw data speeds, but middle mile and core networks. The wireless industry…

Read More

10 Benefits of Drone-Based Asset Inspections

By: Frank Segarra    1/15/2018

Although a new and emerging technology, (which is still evolving), in early 2018, most companies are not aware of the possible benefits they can achie…

Read More

VR Could Change Entertainment Forever

By: Special Guest    1/11/2018

VR could change everything from how we play video games to how we interact with our friends and family. VR has the power to change how we consume all …

Read More

Making Connections - The Value of Data Correlation

By: Special Guest    1/5/2018

The app economy is upon us, and businesses of all stripes are moving to address it. In this age of digital transformation, businesses rely on applicat…

Read More