Cable operators who might be laser-focused on keeping customers from fleeing to Netflix (NASDAQ: NFLX) have just gotten a bigger headache. AT&T (NYSE: T) and The Chernin Group say they're putting $500 million into a joint venture to "acquire, invest in and launch over-the-top (OTT) video services."
Speaking of Netflix, the joint venture will do nothing to soothe the already contentious relationship between that streaming content provider and the network, especially since AT&T is touting its "skill sets to address the growing consumer demand for accessing content how and when they want it," as John Stankey, AT&T's chief strategy officer, said in a press release.
AT&T is bringing an ever-expanding fiber-based network and concurrent subscribers--including those who might have an easier time streaming if and when the carrier follows through on its 1 Gbps expansion--and Chernin contributes content, led by but not exclusive to Chernin Entertainment.
"A critical part of The Chernin Group's strategy has been our significant focus on the online video industry, and joining forces with AT&T only further underscores our strategic commitment in this area as operators, investors and programmers," Peter Chernin, chairman-CEO of The Chernin Group said in the release.
Of course there is online video, and there is over-the-top online video. This joint venture focuses on the latter, and that's what makes it both interesting and potentially threatening to existing pay TV service providers.
"Consumers are increasingly viewing video content on their phones, tablets, computers, game consoles and connected TVs on mobile and broadband computers, game consoles and connected TVs on mobile and broadband networks," Chernin continued. "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."
AT&T very recently announced it would build out networks to serve 100 Gbps download speeds to over 100 cities and municipalities as part of its Project VIP upgrade and, in no small measure, as a way to offset/combat Google Fiber's expansion nationwide.
"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," John Stankey, chief strategy officer at AT&T said in the release.
The two companies did not disclose further financial details of the joint venture, nor when or in what markets it would start, noting only that "the strategic goal of this initiative will be to invest in advertising and subscription VOD channels as well as streaming services."
- see the press release
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