AT&T Inc. (T:US) plans to introduce an online-TV service by the end of this year, part of a pact with Chernin Group to invest more than $500 million to draw consumers who are flocking to Internet video.
The partners are looking at deals with television networks for live programming as well as building or investing in niche video-on-demand and curated services, where shows are queued up for viewers based on their tastes, said John Stankey, AT&T’s chief strategy officer. While AT&T’s U-verse, a traditional cable-TV service, is only offered in parts of the U.S. where the company has landlines, the new online product will be available nationwide, Stankey said today in an interview.
“Within this year, you will see us starting to roll out a product,” Stankey said.
The alliance with Chernin Group, led by former Fox broadcasting executive Peter Chernin, gives AT&T a path to move beyond the classic pay-TV model. With online-video services such as Netflix Inc. gaining popularity, the number of Americans paying for television from cable, satellite or phone providers fell for the first time last year, leading companies including Dish Network Corp. (DISH:US) to strike deals for online video.
“This is the first inning of a sizable migration to online video,” Chernin said in an interview today. “Netflix has done a spectacular job, but I don’t think this is a one-company industry. I don’t think the one-size-fits-all product lineup is necessarily the only thing that will appeal to consumers.”
AT&T, Dish and other traditional pay-TV providers are competing with technology companies such as Sony Corp. and Apple Inc. to offer a video product over the Internet that would be similar to cable TV, with the same programming aired in a live, or linear, fashion. Such services are known as over-the-top, or OTT, television because they deliver video on top of an Internet connection.
Dish struck a deal in March to carry Walt Disney Co.’s channels, including ESPN, in an OTT service. Sony reached a preliminary agreement in August to stream Viacom Inc.’s programming, a person with knowledge of the matter said at the time.
The partnership between Dallas-based AT&T and Los Angeles-based Chernin Group will include subscription services and those that rely on advertising for revenue, the companies said today in a statement. Chernin Group will contribute assets including its majority stake in Crunchyroll, which provides online Asian media such as anime.
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