When 2018 began, AT&T did not have a massive media and advertising business. But the telecom giant is closing the year with a portfolio of TV networks, multiple direct-to-consumer streaming video services and an advertising division that spans traditional and digital media. Here are five things we learned about AT&T’s media and advertising business in 2018:
AT&T wants to rival the tech giants
AT&T didn’t buy WarnerMedia only to compete with its traditional rivals such as Comcast and Verizon, but also to keep pace with newer adversaries including Facebook, Amazon, Apple, Netflix and Google (collectively dubbed FAANG). Without owning the distribution pipes, as well as some high-profile content that runs through those pipes and an ad business that runs alongside it, “you’re gonna have a hard time competing with these guys,” AT&T CEO Randall Stephenson said at Recode’s Code Conference in May.
Through WarnerMedia, AT&T acquired not only to Turner’s and HBO’s TV networks and digital properties, but also their content and Warner Bros.’s film-and-TV library. And in Turner, AT&T’s advertising division — overseen by former WPP exec Brian Lesser — gained access to some valuable TV, digital and OTT inventory. AT&T has some big plans following its WarnerMedia acquisition, notably a streaming video service to rival Netflix, Amazon and Apple, as well as an advanced advertising business to compete against Google, Facebook and Amazon for big TV dollars.
AT&T wants to make addressable TV advertising more than a niche business
Aside from Turner, the foundation of AT&T’s advertising business is AdWorks, which sells targeted TV ads on AT&T’s DirecTV and U-verse pay-TV services. But addressable TV advertising has been beset by the perception that there’s not enough inventory available for advertisers. AT&T is trying to change that.
AT&T’s Xandr advertising business has signed deals with cable-TV providers Altice and Frontier to sell their addressable TV inventory alongside the inventory it already has from DirecTV and U-Verse, which will give it access to 40 percent of the addressable TV inventory available next year, according to Jason Brown, vp and head of ad sales partnerships at Xandr.
The acquisition of Turner’s networks could open up more inventory if AT&T follows Comcast-NBCUniversal’s example and starts selling targeted ads against more of Turner’s TV inventory beyond the two minutes per hour that DirecTV and U-Verse are allotted.
AT&T wants to be a one-stop shop for digital video advertising
AT&T’s advertising ambitions are not limited to addressable TV or TV in general. After acquiring AppNexus in August, AT&T’s Xandr division is looking to sell ads across a whole network of third-party publishers with an emphasis on digital video.
However Xandr still has work to do. The division — which has been somewhat quiet since its rebranding in September and is said to be hashing out its product roadmap — has been working to acquire more premium digital video inventory, according to ad buyers who cited that as the biggest need that Xandr currently has.
Xandr could help itself to fill that need by adding inventory from Turner’s properties and commingling its addressable TV and digital video ad sales. Those moves — and the addition of demographic-based guarantees, another thing desired by ad buyers — could help to establish a pipeline of ad spend that may lure more publishers, particularly those looking to foster more competition against Google, Facebook and Amazon.
AT&T wants to catch the cord-cutters
AT&T’s DirecTV business has been losing subscribers like every other traditional pay-TV service, which is why AT&T has two streaming TV services that aim to catch those customers when they cut the cord.
AT&T’s DirecTV Now had been able to stanch the bleeding for a time. In the second quarter of 2018, DirecTV Now added 342,000 subscribers to more than offset the 262,000 linear TV subscribers lost in the period. But that didn’t continue in the third quarter, when DirecTV Now only added 49,000 subscribers, which was far short of the 346,000 linear TV subscribers that AT&T lost in the period.
DirecTV Now isn’t AT&T’s only streaming TV business. In June the company debuted WatchTV, a $15-a-month skinny bundle of live TV channels. While WatchTV is primarily aimed at AT&T’s wireless customers — it’s free for those with unlimited data plans — the service is open to anyone and works on mobile as well as connected TV devices.
AT&T wants to have a portfolio of streaming video services
DirecTV Now and WatchTV are far from AT&T’s only attempts to cater to cord-cutters. The company has a whole portfolio of streaming video services, even after shutting down some of them.
After taking full ownership of Otter Media in August, AT&T has anime-centric subscription streaming service Crunchyroll as well as Vrv, a subscription service featuring a bundle of on-demand channels from Otter Media companies and other companies such as AMC. AT&T also has OTT apps for HBO and Turner’s cable networks. And in March, Turner-owned Bleacher Report introduced B/R Live, which streams live broadcasts of sporting events, including NBA games and UEFA soccer matches.
AT&T has pared down its streaming video services by shutting down DramaFever and FilmStruck in October. But it has at least one more — a big one — on the way with an unnamed direct-to-consumer streaming product that WarnerMedia plans to unveil in late 2019. Little information is known about what WarnerMedia is planning, but it’s likely to have multiple tiers that bundle different parts of the broad WarnerMedia ecosystem. It will also have its own original content, which will be overseen by Kevin Reilly, who most recently served as head of Turner’s TNT and TBS.