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When regimes change, so do priorities. And AT&T, hell-bent on competing with Netflix and the digital ad duopoly, is currently choosing which digital businesses under WarnerMedia it wants to keep.

The key hits:

  • AT&T abruptly shut down Warner Bros.-owned DramaFever last week, followed by Turner’s digital comedy studio Super Deluxe.
  • More digital businesses are likely to get the axe or be downsized in some way as AT&T weighs which brands it wants to continue investing in.
  • Crunchyroll and Vrv, which came to AT&T as part of the Otter Media acquisition, remain prized properties — “favored children,” as some sources call them.

DramaFever was a casualty of AT&T’s growing war with the tech media giants, but it’s not going to be the only one. Last Friday, three days after shutting down DramaFever’s service, which operated underneath Warner Bros., AT&T and Turner said the digital studio Super Deluxe — which had been producing irreverent programming for Facebook and other digital platforms, and also had sold a show to Netflix — would also shut down.

“There are now massive changes in the social and mobile-first ecosystem and duplication with other business units in our new WarnerMedia portfolio,” read a statement from a Turner Entertainment spokesperson. “Super Deluxe found inspiring ways of connecting with a new generation and many of their best practices will be adopted by other Turner properties as we redirect this investment back into our portfolio.”

Neither DramaFever or Super Deluxe were profitable and operated in the shadow of tech giants in the content licensing and digital ad businesses. But the big story here is that AT&T is not interested in building subscription and advertising businesses that could make tens of millions of dollars. The wireless giant spent $85 billion on Time Warner so it could compete with Netflix and Amazon for direct subscription dollars, and Facebook and Google in the digital ad market. In this market reality, some digital businesses that were experiments or unprofitable are no longer a priority.

As one Turner source recently told me, he’s not surprised by what AT&T is doing and he’s expecting a few more digital businesses to get the axe — or at least get downsized. Some cuts are expected at Fullscreen, which came to AT&T as part of the Otter Media acquisition, a source said. “AT&T have bought so much [stuff], they are cleaning house,” said another.

One area of the digital business that will continue to get investment: Otter Media, which includes Crunchyroll and Vrv, both of which continue to grow and are said to be “favored children” within the AT&T/WarnerMedia family.

It seems like Vrv, in particular, is going to get more (positive) attention. The platform bundles and distributes subscription streaming channels from Crunchyroll, Rooster Teeth and others. I’ve reported before on how Vrv — or at least the tech underneath Vrv — could be used for an Amazon Channels-like distribution program. But even in the near-term, it’s hard not to see a scenario in which Vrv distributes more streaming channels from across the WarnerMedia portfolio.

More will continue to drip out as AT&T and WarnerMedia build up “HBO Plus” and the ecosystem of apps, channels and businesses that will support it. But in the meantime, pour one out for DramaFever, which actually built a brand that some people cared a ton about, and Super Deluxe, which made some extremely good (stuff).

Confessional

“In general, the only way to not be profitable is if you can be big in the future. If the potential to be big does not exist, then, yeah, profits matter a lot.” — OTT programmer

Numbers don’t lie
$859 million: Netflix’s negative cash flow in the third quarter. The company plans to raise another $2 billion in new debt to fund its content spending spree.

250 percent: Viewing of ad-supported content on Amazon’s Fire TV has more than doubled in the past year, according to Amazon.

Speaking gig: Digiday Video Marketing Summit
We’re hosting our first-ever Video Marketing Summit in Nashville from Nov. 28-30. The event will tackle a wide range of topics in video marketing and advertising. Want to speak? Want to attend as a VIP? Hit me up. (Again: This opportunity is for brand marketers and ad agencies only.)

What we’ve covered
How digital entertainment companies make new money from old videos:

  • Companies such as Viacom, Pocket.watch and Jukin Media are using their video libraries to earn new syndication money on platforms ranging from Amazon to Pluto TV.
  • This opens up new revenue streams for expensive episodic shows that weren’t profitable during their initial run.

Read more about the digital video syndication business here.

How AMC Networks’ Shudder keeps subscribers coming back:

  • The horror streaming channel fights rising licensing costs by licensing programming in shorter windows and currying favor with horror film creators.
  • Shudder’s subscriber base has doubled year over year.

Read more about Shudder here.

What we’re reading
Netflix’s debt-fueled road to eating the entertainment world: The New York Times has a nice piece on how much Netflix is spending — $18.6 billion — on content and why investors are fine with the company burning through so much cash.

Are Facebook’s metrics blunders to blame for the “pivot to video”?: To the extent that publishers found a quick and cheap way to show meaningless scale, sure. But no one was paying attention to “average view duration” when the three-second video view was leading to a sexier number.

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