T AT&T Inc

By Alexandra Bruell 

Carriage deals between pay-TV distributors and programmers typically hinge on price.

In the negotiations between AT&T Inc. and Viacom Inc., however, AT&T threw in an extra wrinkle: It asked Viacom to buy advanced ad products and sales services from Xandr, AT&T's advertising group, according to people familiar with the matter.

That could give Xandr the ability to sell some commercial time on Viacom's networks, which include MTV, Comedy Central and Nickelodeon.

The companies were continuing negotiations over the weekend to avert a programming blackout that would affect more than 24 million customers of AT&T's DirecTV, U-verse and WatchTV services. Their latest contract expired at midnight Friday.

As of Sunday, Viacom's channels were still on the air as the parties continued to talk, and people close to the discussions expressed optimism a deal was within reach.

Programmers typically let pay-TV distributors such as cable and satellite companies have two minutes of ad time per hour to sell for themselves. Local advertisers usually buy that time to reach households within specific regions.

AT&T's request for Viacom to buy Xandr ad products is separate from the typical two-minute arrangement.

Trying to bring Xandr into carriage talks shows AT&T's desire to boost its ad business following the company's acquisition of Time Warner Inc., which brought in TV networks like CNN, TBS and TNT. AT&T has expressed ambitions to create better targeting for TV commercials on its TV networks.

The $70 billion-plus U.S. TV ad market still largely runs on handshakes between ad buyers and sellers. But the industry is trying to modernize as it competes for marketers' budgets against digital ad giants like Alphabet Inc.'s Google and Facebook Inc.

Eventually, AT&T wants to build an automated marketplace within Xandr where people can buy and sell commercial ads across TV networks with the help of AT&T data. The company acquired advertising-technology firm AppNexus last summer to help build the marketplace.

Xandr is working to build relationships with TV networks outside AT&T, holding conversations with programmers including Comcast Corp.'s NBCUniversal, CBS and Fox about various ad deals. Its pitch includes outsourced ad-sales support and a tool that uses AT&T data to help advertisers plan their ad buys, according to the people familiar with the matter.

TV executives would like the ability to carve out more of their national ad inventory and sell it for a premium to marketers targeting specific households -- simultaneously showing a minivan commercial to a large family and a sports-car ad to a single neighbor watching the same program, for example.

Networks need distributors like AT&T's DirecTV to make that kind of targeting possible, and new technology and data to make it possible on a broader scale.

But network executives aren't sold on Xandr's value. Although the promise of a data-rich, automated marketplace for the traditional TV-ad business is intriguing, it is far from a reality, according to media executives familiar with the discussions. And there is no value in just outsourcing ad sales to AT&T's manual sales force, they said.

OpenAP LLC, a consortium of several media companies, has created a standardized system that lets advertisers use the same data sets to inform their media plans across networks. NCC Media, an organization backed by cable giants like Cox Communications Inc., Charter Communications Inc. and Comcast, also is working on capabilities to use data in advanced TV ad buying.

Write to Alexandra Bruell at alexandra.bruell@wsj.com

(END) Dow Jones Newswires

March 24, 2019 13:58 ET (17:58 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.