Media companies are under pressure to stay relevant with mobile-addicted millennials and distribution companies are trying to diversify their revenue streams. That’s a key part of the rationale behind AT&T’s proposed $85 billion deal for Time Warner.
“This is a completely defensive move,” said Dan Coates, president and co-founder of Ypulse, a youth-focused consulting firm. “If you’re sitting in Time Warner’s and AT&T’s shoes, content is the driver of the mobile experience. And when it comes to the guys who make content, they can’t just rely on cable companies to distribute their content.”
The largest demographic, representing one third of the U.S. population, millennials watch media differently from older generations. TV still dominates — 88 percent of those born between 1981 and 2000 watch TV, compared to 94 percent of Gen Xers. But they’re also the biggest cohort watching digital video, with nearly 94 percent of millennial internet users watching streaming video, according to eMarketer. AT&T has already gotten a foothold in streaming video services, entering a joint venture with Chernin Group to form millennial-aimed Otter Media in 2014.
“They’re the only generation for whom digital video is more important than TV,” said Paul Verna, media analyst at eMarketer.
What they are watching is Netflix, the top service used by 72 percent of those age 13-33, followed by YouTube at 68 percent, according to Ypulse. Cable was a distant third, at 45 percent, said Coates. “Teens especially, this is their onboard experience to the media universe,” he said. “If you have Netflix, why would you need anything else?”
AT&T’s approach differs sharply from that of rival Verizon, which is looking to pure-play digital companies AOL and Yahoo and streaming service Go90 to bolster its reach with millennials. But skeptics doubt that acquiring two aging portals will do much good for Verizon’s image — and Verizon’s Go90 has shown it’s hard to build a new media property from scratch.
Time Warner would bring AT&T many already popular news and entertainment properties, though, including HBO, CNN and Turner Sports along with other TV shows and movies. HBO is a rare network that can charge on its own for a streaming service, and digitally-forward CNN is consistently popular across age groups, according to Pew Research Center. Thirty-five percent of males 13-33 said sports were the only reason they had cable, according to Ypulse.
“If there’s one thing people will tune in to live at an appointed time, it’s sports, and keeping people from getting rid of their cable system, it’s sports,” Verna said. “The fact Time Warner has all of these things makes it a broad player in the content world.”
Cord-cutting threatens both AT&T’s DirecTV and Time Warner’s business, and no generation is likely to do so more than millennials. Nine percent of people aged 18-34 said they’d stop paying for a pay-TV package, compared to 5.7 percent of people aged 18-64.
AT&T brings wireless and broadband service to the table, though, both of which are key to how millennials get their entertainment. It’s easy to imagine AT&T packaging up phone, internet and an HBO subscription all in one single bill, something that could play well with young consumers, Coates said. “They love simplicity. They’re absolutely thrilled to get all the things in one place.”
More in Media
The agency accused the e-commerce giant of conducting a range of anticompetitive behaviors that hurt both shoppers and sellers.
The Independent’s Blair Tapper & Thomson Reuters’ Josef Najm are trying to break down advertisers’ news blocks
In a live recording during the Digiday Publishing Summit, the news executives called for more nuanced conversations with advertisers around their brand safety concerns.
After investing in one generative AI startup and suing another, the company will let customers create images on its website and an API.