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6 June 2019

WarnerMedia struggles to erase confusion over streaming strategy

Sometimes attempts to resolve confusion only make it worse and that has been the case so far for the forthcoming AT&T WarnerMedia streaming service. Every effort to clarify positioning so far has added another layer to the confusion, which is clearly not deliberate so raises the question why AT&T has failed to give a clear message.

For the answer, we must go back to the drawing board, with the aim of developing a streaming service harnessing the content assets AT&T now had after the $85.4 billion acquisition of Time Warner, capable of taking on the big rivals emerging in this area. These included of course Netflix and Amazon Prime Video, as well as Disney+ emerging from that stable’s $71 billion acquisition of 21st Century Fox and Comcast similarly exploiting its NBCUniversal assets for a new streaming service.

Netflix is the primary target for all three of the emerging streaming services from the new big three of Disney, AT&T and Comcast, although they will also be competing strongly with each other. Netflix has a highly successful package structure which is both flexible and simple to understand around pricing tiers that differ just in the number of simultaneous streams allowed and their resolution. Everybody gets the same content which tends to disguise the fact that actually behind the UI there is a lot that any given subscriber has no interest in.

The emerging big three have been scratching around trying to position their assets in an appealing way with as much flexibility as possible in order to avoid recreating the bloated packages of the pay TV era that helped stir the stampede of churn that has afflicted the US and is now rippling out around the rest of the world.

At the same time, they want to lock subscribers in as much as possible, which is why Disney indicated in April 2019 that it would bundle Hulu, which it now has effective full control over with the new Disney+ and also ESPN Plus for live sports at a discount, creating a combined SVoD and linear OTT package. This is beginning to look rather like the old pay TV packages, admittedly at a substantially lower price. There is some confusion here in mixing Disney+, which will deliver its own content exclusively, with ESPN+, given that the parent ESPN service is available through third party pay TV outlets. For that reason, Disney has been careful to separate the two so that ESPN+ carries original programming and sports not found on mainstream ESPN, which is likely to degrade over the next few years in any case.

AT&T meanwhile has been victim of internal disagreement over what content should be exclusive to its forthcoming WarnerMedia streaming service and what should be licensed to third parties. There are pros and cons either way with the risk of losing revenue through exclusivity to a platform that may not gain as many subscribers as hoped. AT&T has also indicated there will be three tiers of content within the one universal WarnerMedia service, which adds further to confusion.

These tiers will be anchored around HBO which already costs $14.99 a month for the HBO Now streaming version. New tiers will include WarnerMedia’s film library, along with TV content from networks such as Cartoon Network, TNT, and TBS, as well as DC Universe. The implication is that these tiers would rise to substantially higher prices than HBO Now, which risks alienating consumers who would see this as recreating an unnecessarily bloated package for the content they want. AT&T in its efforts to amass subscribers through bundling as Disney is trying to do will be under pressure to increase flexibility and trim prices to those of its rivals.

There is also the risk of killing the goose laying its golden eggs, that is HBO, which has a reputation for quality, but which AT&T wants to deliver more quantity after a substantial reorganization that has not gone down well with existing HBO staff. AT&T wants HBO to create shorter, bite-sized content, comprising episodes of say 20 minutes rather than the 60 minutes common for TV series.

This is hardly a new idea, but while there is clearly a market for shorter form content geared to mobile there is little evidence smartphone users are deterred by longer episodes if the content is sufficiently compelling.

The one thing then that is clear is that AT&T still has work to do refining its streaming strategy, which is a necessary first step before conveying a clear message to consumers.