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AT&T eyes outdated MCN acquisition to bolster appeal to mobile viewers

AT&T is considering acquiring full ownership of the digital media subsidiary Otter Media that it launched with The Chernin Group back in 2014 – an investment made during a peak in the MCN hysteria that swept the telecom and media sector amid the rise of YouTube’s original programming paradigm shift.

At the time, AT&T pledged $500 million to the joint venture for developing over the top content and services that would appeal to younger viewers. AT&T head Randall Stephenson said the telco planned to leverage the subsequent content and streaming services for delivery across its wireless network to smartphones.

That was one of the earliest articulations of Stephenson’s grand vision of pairing content assets with its wireless networks and customers. That vision was further refined with the launch of AT&T’s mobile-first streaming pay TV service, DirecTV Now; and the vision can be further tracked to AT&T’s proposed acquisition of Time Warner. Stephenson has argued that the acquisition of content producer Time Warner will help position the company to take advantage of the advances of 5G networks in content delivery over mobile networks.

“The world of distribution and content is converging, and we need to move fast and if we want to do something truly unique, we need to begin to curate content differently, begin to format content differently for these mobile environments,” Stephenson told CNBC last year about the Time Warner merger. “This is all about mobility.”

In the intervening years, Otter Media – along with its little sister company Ellation – has become a behind-the-scenes digital media holding company. Its assets include the popular anime OTT service Crunchyroll, the virtually unheard of CreativeBug, YouTube MCNs Rooster Teeth and Fullscreen, digital studio Gunpowder & Sky, and Reese Witherspoon’s digital media company Hello Sunshine, among others. Otter Media also owns a digital bundled subscription service VRV that packages a slate of digital programming channels that appeal to different demographic niches.

The acquisition news comes at a time when most other big media firms are downshifting on their digital media strategies. Verizon has revamped the UX of its mobile-first Go90 in a desperate attempt to save the service, while NBC recently closed down its comedy-focused subscription OTT service, SeeSo, earlier this year. Otter Media’s own Fullscreen, which launched as a premium subscription service in 2016, announced it was closing its doors in January 2018.

VRV, however, seems to be going strong. The service bundles niche streaming channels together for a monthly price of $10. Those channels include Crunchyroll, Funimation, Rooster Teeth, Nerdist, Geek and Sundry, AMC’s Shudder, and others. VRV announced earlier this month it has reached 1 million active users during the last year, and has announced a slew of new programming deals, including the science and documentary service Curiosity Stream and indie movie streaming service Mubi.

VRV’s success is an interesting outlier in the world of ever-increasing content choices, and especially in light of the recent waning of MCNs we’ve witnessed over the past year. By all measures, Fullscreen should have been the successful service: the subscription service offered digital-native content alongside Millennial favorites like Dawson’s Creek and The Breakfast Club; AT&T bundled subscriptions to Fullscreen up with its mobile network and pay TV services, and it was even airing some Fullscreen-developed content on AT&T’s Audience Network pay TV channel. Despite those efforts, Fullscreen did not muster enough subscribers to pay $4 per month to keep the service afloat.

Perhaps the key to VRV’s success, then, is in part due to AT&T’s having left it alone. It’s unlikely that AT&T will officially complete its acquisition of the remaining shares of Otter Media until after its Time Warner merger is done, so there’s still time for VRV to thrive before AT&T smothers it in its legacy video provider wisdom.

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