T AT&T Inc

By Drew FitzGerald and Joe Flint 

AT&T Inc. is set to launch a streaming video service next year featuring films and TV shows it acquired from its blockbuster purchase of Time Warner, bringing another service to a crowded marketplace and ratcheting up its rivalry with Netflix Inc.

The new online service, which has yet to be named or priced, is expected to debut in the fourth quarter of 2019, AT&T said on Wednesday. It will center around HBO and offer a selection of AT&T-owned movies and TV series but won't replace the existing streaming service HBO Now, said John Stankey, chief of WarnerMedia, as Time Warner is now called.

AT&T's push into the direct-to-consumer battlefield is the latest sign that entertainment companies want to establish their direct lane to the customer instead of relying on a third-party distributor to act as a go-between. As more consumers abandon traditional cable and satellite-TV contracts, entertainment companies are trying to keep up with Netflix, Amazon.com Inc. and new low-cost upstarts.

Walt Disney Co. in August sketched out plans for a direct video service that could carry everything from "The Simpsons" to "The Avengers" movies. It is also slated to launch next year.

When Disney first announced its streaming service last year, it also said it would pull future movies from Netflix. Disney has since agreed to buy a variety of assets that are a part of 21st Century Fox Inc. Fox and Wall Street Journal parent News Corp share common ownership.

Mr. Stankey said AT&T won't be pulling all of its programming off third-party services like Netflix, which have helped boost Time Warner's profits for years. But there are scenarios he could envision where new and older content could be exclusive to AT&T's new streaming service, he said.

AT&T said the planned service's new subscribers would offset licensing revenue, suggesting the company could make fewer movies and reruns available to rival services in favor of its own brand.

Mr. Stankey said his job "isn't to build another Netflix," though WarnerMedia can't afford to be left behind, as more TV watchers demand to view video outside their traditional cable packages.

Netflix and Amazon have plowed billions of dollars into original programming and attracted millions of paid subscribers in the process.

"We better be at that table when the customer makes that decision: That is a collection of things I must have," he said.

One relationship that could change as AT&T pursues its direct-to-consumer strategy is between the CW Network and Netflix, which is the second home for popular CW shows such as "Riverdale," "Arrow" and "The Flash."

The streaming deal Netflix has with the CW has made the network, which is a joint-venture between Warner Bros. and CBS Corp., a profitable entity. The shows, which are popular on Netflix, also helped drive up CW's viewership.

Mr. Stankey declined to say whether AT&T would renew that deal when it expires but noted that the CW shows appeal to a key young adult demographic that most networks and platforms struggle to reach.

AT&T took control of HBO as well as Turner channels like TNT and TBS and the storied Warner Bros. film studios after a bruising antitrust fight against the U.S. Justice Department. A federal judge in June ruled the Time Warner deal could proceed, though the government has appealed that decision.

The move to create a one-size-fits-all streaming service is a sign of the changing culture that AT&T is seeking to bring to WarnerMedia, which generated $31 billion of revenue last year. For much of its history, Warner Bros., HBO and Turner operated as individual fiefs that rarely worked together. That arrangement started to change in recent years, as new leaders were tapped for the three units. Now, with AT&T in control, it is pushing harder for a more collaborative environment.

AT&T first jumped into the streaming TV field in 2016 with DirecTV Now, an online-only TV package. A slimmer bundle of channels called WatchTV went live in June.

Unlike AT&T's previous offerings, which bundle channels from all over the media landscape, the company's new service will offer films, TV series, older content, documentaries and animated shows in a new package. Aside from HBO, its existing on-demand brands include Boomerang, FilmStruck and Machinima, though Time Warner's chief executive said during the trial that those digital offerings have signed on less than half a million subscribers among them.

The company said in a securities filing it would fund the new product with "incremental efficiencies within the WarnerMedia operations" and by diverting resources from "subscale" direct-to-consumer efforts, among other things.

The new service won't include news from CNN, though Mr. Stankey said some CNN documentaries could be on the menu. He also said HBO was a "really important property" but might not be reaching all the customers it wants as a stand-alone brand.

"What's different about this product is it's HBO and more," he said.

Write to Drew FitzGerald at andrew.fitzgerald@wsj.com and Joe Flint at joe.flint@wsj.com

(END) Dow Jones Newswires

October 10, 2018 18:49 ET (22:49 GMT)

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