AT&T's $500M OTT video venture with Chernin Group could center on mobile services

AT&T (NYSE: T) announced a new, $500 million joint venture with The Chernin Group, a Hollywood production company for TV shows and movies, to target the over-the-top online video space--and AT&T specifically mentioned mobile as a key element in its efforts to expand into OTT online video.

"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," explained John Stankey, AT&T's chief strategy officer.

An AT&T spokesperson declined to provide details about the effort beyond the companies' announcement, including the exact amount of AT&T's financial commitment. But AT&T's Roberta Thomson did say that the carrier made it a point to mention its mobile business in its announcement of the joint venture.

Mark Lowenstein, managing director of Mobile Ecosystem and a FierceWireless contributor, explained that the new joint venture could signal AT&T's plans to tie original video content to its mobile and broadband network in order to entice users to its services. "Where are the pillars of differentiation?" Lowenstein asked. "Content could certainly be in one of those areas."

Lowenstein explained that AT&T may be following the lead of companies like Netflix (NASDAQ: NFLX) and Amazon (NASDAQ: AMZN) that are investing in the creation of original video content in an effort to encourage users to sign up for their respective services. Further, AT&T could leverage its mobile network to make its own original content more appealing, possibly through the creation of mobile pricing packages that favor its own content. Lowenstein also pointed to AT&T's new Sponsored Data program, which allows advertisers to cover the cost of users' mobile data access charges, as another element that could factor into AT&T's new OTT joint venture with The Chernin Group.

"They have insight into the way that mobile networks will handle that content," Lowenstein said. "They probably think that with the right partners they can create a pretty nice package, with mobile-friendly and mobile-centric content."

Lowenstein said that, in the short term, Hollywood TV and film producers now know that they could receive funding from the AT&T-Chernin Group joint venture for content, including content designed for mobile users.

Of course, AT&T isn't the only company targeting the intersection of mobile and video. Verizon Wireless (NYSE: VZ) has said it plans to implement LTE Multicast technology in an effort to make the delivery of video to mobile subscribers cheaper and more effective. And Verizon earlier this year said it will launch "next-generation" video services on its FiOS TV platform and through a new over-top-video service, using the OnCue interactive TV technology it picked up through the acquisition of Intel's Media division.

And existing OTT video players are already targeting mobile users. For example, OTT video heavyweight Netflix offers its services on a wide range of tablets and smartphones--although the company said its subscribers are wary of cellular connections.

"There is a good amount of watching on a mobile phone, but unusually when it's on Wi-Fi, because of the data caps," Netflix CEO Reed Hastings said on the company's quarterly conference call, according to a Morningstar transcript of the event. "Cellular plans generally have data caps between 2 and 5 gigabytes, which you can use up pretty quickly and consumers are very aware of whether they're on Wi-Fi or not, and so they're using their mobile phones and tablets, but mostly on Wi-Fi rather than on cellular. Now, if with 4G, we see more competition and lowering prices and eventually uncapped plans as they try to compete with wired, then we could see more of that, but right now that's not what we're seeing in wireless."

For more:
- see this AT&T release
- see this FierceCable article

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