Move towards OTT causing upheaval in content, telecom markets; Comcast in the middle of it all

Tom Paine

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Media convergence (an overused term), you might call it, seems to be reaching a fever pitch. Mostly, its pushing content companies together with more technology oriented enterprises.

Exhibit A is AT&T's approach to Time Warner, which resulted in an agreement this weekend under which AT&T would acquire Time Warner for $85 billion. AT&T was said to want to push the process quickly to a conclusion to keep Time Warner out of the arms of others (maybe Google, even Apple perhaps).

At&T acquired DirecTV for $49 billion last year, but is said to be planning to phase out the satellite business in 3 to 5 years and banking its future distribution on a large-scale OTT service, DirecTV Now, to be launched by the end of this year (actually November).

AT&t also appears to be deemphasizing its U-verse wired broadband service. What its ultimate network technology strategy will be - some combination of wired and wireless presumably - is not clear now.

As Fortune reported, "the logic behind AT&T acquiring Time Warner would likely be to counteract moves by Comcast, the cable giant that also owns NBC Universal, some analysts said."

Meanwhile, Comcast doubled its bet on new media darling BuzzFeed, according to Recode, increasing its investment from $200 million to $400 million. BuzzFeed is seen as a vehicle for Comcast's ambitions in non-linear video, on YouTube and other platforms outside the traditional cable stack. BuzzFeed's valuation for the deal is $1.7 billion, slightly more than it was for Comcast's first investment. There were reports, unconfirmed, that BuzzFeed badly missed its revenue targets last year.

But Sam Landman, a managing director at Comcast Ventures, is holding off on backing some recent media start-ups he’s seen, according to an LA Times article, until they demonstrate more revenue-generating ability.

Google has gained rights to all of CBS' content for its OTT service, including live NFL games, Reuters and the Wall Street Journal reported last week. The new "Unplugged" OTT service, scheduled for an early 2017 launch, will be part of Google's YouTube platform.

Also, reports last week suggested that NBCU is close to coming on board with Google's Unplugged, for much if not all of its content.

Last week also saw Comcast announce its new Comcast Technology Solutions division, a combination of its Comcast Wholesale, thePlatform and This Technology business units. Comcast Technology Solutions encompasses an Ad Platform, Video Platform and Wholesale Platform. The new unit will support the market for third-party OTT platforms and related media technology services; publisher Time Inc. is an initial client.

Verizon's results last week underscored the impact of increased wireless pricing pressures and slowing growth, and also was a reminder of its relatively weak position in content. I'll be contrarian, however, in taking the position that owning tons of content may not be an optimal course for a telecom company, and that Verizon may not be off track in its strategy.

From AT&T's point of view, however, some of the thinking behind the Time Warner deal is that the more valuable content you own, the more reciprocal power you have in negotiating for rights to other's content.

Links 10/24: Moffett: Comcast Verizon MVNO plans could be good for both companies; T-Mobile jumps 9% on speculation

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Moffett: Comcast Verizon MVNO Plans Could Be Good for Both Companies (Telecompetitor)

AT&T/Time Warner deal could be approved without any FCC merger review (Ars Technica)

AT&T Exec Blogs Case for Time Warner Merger
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Michael Wolff on AT&T's Time Warner Deal and the Coming Game of Dominoes (Hollywood Reporter)

AT&T Clarifies Its Intent to Buy Time Warner (Not a Similarly Named Cable Company) (Hollywood Reporter)

T-Mobile Jumps 9%. Could It Be Bought?

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Both FanDuel and DraftKings are reportedly close to running out of cash, though in the past they've always been able to gin up more when needed.

TD Ameritrade faces scrutiny over Scottrade purchase (Reuters)
TD Bank also buying Scottrade banking business.

NetSuite reduces loss, but revenue outlook withdrawn (Diginomica)

Chance encounter with an AT&T DirecTV distributor

Tom Paine

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I happened to run into a DirecTV contractor (I assumed he was an independent, as most are), quite by chance this weekend.

When I mentioned to him that AT&T (which acquired DirecTV last year for a mere $49 billion) was acquiring Time Warner for $85 billion, he assumed I meant Time Warner Cable. I explained to him that TWC had been spun off from Time Warner a few years back, and was more recently acquired by Charter.

He seemed even more surprised that AT&T was spending all that money on programming content, like the Cartoon Network.

What really threw him was when I said AT&T was planning to get out of satellite distribution over the next five years or so, and rely on an OTT (over the internet) model. "That's our business," he responded. They serve the rural mountain counties around here where cable companies don't go, and there are few other options. One person I spoke with recently couldn't even get DSL.

Since I didn't mean to upset him, I told him that AT&T probably would make arrangements to continue to serve such customers by satellite, either by itself or by spinning off the rural areas to a separate company, as Verizon has done with its outlying territories.

Unless, I said, AT&T can come up with a robust enough LTE service for areas like that; then all bets are off.