AT&T (NYSE:T) finally announced the cross-platform video service it has hinted at for months, outlining a three-tiered offering for smartphones, tablets, PCs, web-enabled TVs and other connected devices.
The nation's second-largest carrier said it plans to target cord-cutters starting in the fourth quarter of 2016 with three streaming options: DirecTV Now, an app focused on content from AT&T's satellite TV business; DirecTV Mobile; an app designed for smartphone viewing and featuring premium video and made-for-digital content; and DirecTV Preview, an ad-supported service leveraging video from "many networks and other content sources" including Otter Media, AT&T's joint venture with The Chernin Group.
AT&T's upcoming offerings will be available to users across both mobile and fixed-line networks, although it didn't disclose any pricing information or details regarding programming or content. The carrier already offers wireless plans that include unlimited data specifically for customers who are also DirecTV subscribers, but it hasn't said whether it will employ a similar model for the tiered service.
The service will not require contracts, satellite dishes or set-top boxes.
John Stankey, CEO of AT&T's Entertainment Group, explained during an investor conference that the new offerings are intended to appeal to the 20 million households in the United States that don't currently subscribe to a pay-TV service. He added that the services would be available to customers of any carrier, not just AT&T.
Stankey also said the carrier won't be able to launch the offerings until the fourth quarter because of the complexity of building such services. "We are going to move all of our customers onto a new middleware platform over the next several years," he said, adding, "We have a lot of work to do."
AT&T (NYSE: VZ) could also use the ad-supported service to deliver sponsored content to its customers, just as Verizon will start doing this week through its FreeBee data offering. Such offerings have garnered criticism from critics who claim they violate net neutrality principles, but mobile operators have shown little fear of experimenting with such models in recent months.
Verizon CFO Fran Shammo this week touted the benefits of sponsored mobile video, noting that the combination of carriers' consumer data and on-the-go content provide a potent tool for marketers. Carriers have historically failed to monetize mobile video, but they increasingly view such services as a viable marketing platform for themselves and their partners.
Indeed, analyst Jan Dawson of Jackdaw Research said that while DirecTV Now is the most compelling of the three services, "the other two offerings are probably best seen as sales and marketing channels for DirecTV Now. DirecTV Mobile harkens back to an earlier era of mobile specific content offerings, and seems a poor fit for this generation's cross-platform content services. As such, it may be a decent fit for a few entirely smartphone centric customers, but will otherwise be unsatisfying for customers who want to watch video on other devices regularly."
Dawson said that DirecTV mobile is more compelling when compared to other carriers' mobile video strategies, "and is the first mobile video strategy from a U.S. carrier that seems likely to make video pay. Binge On's main virtue is as a customer acquisition strategy for wireless services, while Verizon's Go90 remains one of the more baffling services launched into this space and seems destined to remain marginal in the overall market."
And Wells Fargo analyst Jennifer Fritzsche offered a positive outlook on AT&T's announcement. "It is encouraging to see T unveil its roadmap for offering OTT mobile video content," she said in a note to investors. "Recall, T has indicated 2016 is expected to be a 'rolling thunder year' for new bundles and service. This announcement highlights part of the strategic decision behind its decision to acquire DTV in 2015. By offering the majority of DTV content without requiring a linear TV subscription, T will be differentiating itself vs. the other 3 national wireless carriers in a bold and unique way, in our view."
- see this AT&T press release
Shammo: Verizon's zero-rated video to launch on Go90 this week
AT&T teams with Fullscreen on year-long project to develop mobile video
AT&T, Chernin name $500M joint venture 'Otter Media,' make first purchase
Article updated March 2 with additional commentary from Wells Fargo and Stankey.