AT&T has announced a partnership with media holding company The Chernin Group. The partnership will work exclusively in the Internet video services industry by investing $500 million into the sector. By investing, managing, and launching new online services, the partnership may yield new competitors in what is already a crowded industry.
With its U-verse TV, Internet, and Voice service, AT&T is already competing against traditional cable providers. Although some members of the television industry could suffer as a result of people canceling cable subscriptions, the major TV providers are also Internet service providers (ISPs) and will therefore be fine.
The partnership between AT&T and The Chernin Group may be one of the largest, but it is not the first. AT&T's rival telecommunications provider, Verizon, is also looking to enter the online video industry after it purchased Intel Media earlier this year. Prior to the acquisition, Intel Media had planned to release its own TV streaming service.
A Crowded Industry
Netflix, Amazon, YouTube, and many others have become popular video streaming services, particularly among those who have pulled the plug on their cable subscriptions. Now that the potential size of the streaming market has been realized, other large companies like Walt Disney are spending millions to get their foot in the door.
Just this month, Walt Disney spent $950 million to acquire Maker Studios, one of YouTube's largest multichannel networks. The Maker Studios network includes 50,000 channels and generates an estimated 5.5 million page views each month. This type of investment in the online video streaming market is now becoming viable and AT&T's partnership with The Chernin Group proves that.
Other media providers like Netflix have taken over the Internet and are now responsible for the majority of bandwidth usage that ISPs see. This means that as more people move online for video and away from cable, ISPs and online content providers will be the ones that benefit.
What Will It Make?
Little is known about how AT&T and The Chernin Group will use the $500 million. It is clear they will be competing against the likes of Netflix, but Peter Chernin does not believe that is an issue.
"This is the first inning of a sizable migration to online video," Chernin said in an interview Tuesday. "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."
Regular TV content is still popular and as soon as it can be accessed online instead of with a cable subscription, more people will begin to make the transition. This content delivery model, called over-the-top (OTT), may be the focus of AT&T's new venture.
An OTT service, if carried out successfully, will allow people to watch the same programs as they normally would with cable or satellite. Given the potential for success with OTT, many traditional TV providers are trying to come out with a service that works in that way.