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AT&T’s WarnerMedia Streaming Service to Combat Digital Rivals

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AT&T’s WarnerMedia segment

AT&T’s (T) new WarnerMedia segment, which includes Turner and premium TV channel HBO, reported revenue of $9.23 billion in the fourth quarter, beating analysts’ estimate of $9.05 billion. The segment’s revenue rose 6% YoY (year-over-year) in the quarter.

Within the segment, Warner Bros. posted robust growth across both its theatrical and TV businesses backed by a strong movie line-up. Turner also gained in the fourth quarter driven by subscription revenue growth. HBO’s subscription revenue was down 3% YoY primarily due to a carriage dispute. Its content and other revenue also rose in the double digits due to higher international licensing revenue.

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Streaming service

In 2019, AT&T’s WarnerMedia is set to launch its streaming service, which will stream live and on-demand HBO programming through apps and smart TVs to combat digital rivals such as Netflix (NFLX) and Amazon Prime (AMZN). WarnerMedia’s service will carry movies such as Batman and Harry Potter and popular TV series such as Friends and The Big Bang Theory from its Warner Bros. studio.

The company has plans to offer both subscription and commercial-free services akin to HBO and Netflix. Ad-free services are both expensive and in high demand, and therefore, premium content from HBO and Warner Bros. could help WarnerMedia attract consumers. On the other hand, ad-supported subscription services would benefit consumers with lower prices and would help the company invest more in content acquisition.

AT&T’s acquisition of Time Warner has also given it access to Time Warner’s 10% stake in online video provider Hulu. The Walt Disney Company (DIS) and Comcast (CMCSA) are also entering the space in attempts to grab market share. While Disney is launching its direct-to-consumer streaming service in late 2019, Comcast’s NBCUniversal is set to debut its video streaming service in early 2020.

The global over-the-top content market has been developing rapidly and is expected to touch $245.8 billion by the end of 2028, according to a report by Future Market Insights.

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