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AT&T Bets Against Netflix in the Business Diversification Push

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May. 30 2019, Published 2:33 p.m. ET

AT&T looks keen to dilute Netflix’s appeal

AT&T (T) is planning to pull its prime content from rival video-streaming services so it can offer said content exclusively on its own streaming platforms, according to a report by the Dallas News. Through its WarnerMedia division, AT&T previously licensed some of its popular shows and movies to Netflix (NFLX) and Hulu, which have now become competitors as it launches its own video services. AT&T appears to bet that taking back its popular content will make services such as Netflix less attractive, potentially resulting in their subscribers defecting to greener pastures.

Hulu is owned by the Walt Disney Company (DIS), which recently bought AT&T and Comcast (CMCSA) out of the business.

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AT&T is set to expand its video-streaming business

AT&T bought WarnerMedia for $85 billion in a transaction that closed last year. It’s planning to launch a new video service through WarnerMedia in the coming months. At the moment, AT&T runs a video service called DIRECTV NOW, which it launched following its purchase of satellite TV company DIRECTV in 2015. But DIRECTV NOW is struggling. It finished the first quarter with 1.5 million subscribers after losing 83,000 customers in the quarter. Its rival, Sling TV by Dish Network (DISH), finished the first quarter with over 2.4 million subscribers.

Following the money and diversifying

For AT&T, entering into the streaming video business is a two-pronged approach. First, it’s an attempt to follow the money given that the traditional TV market is shrinking as video consumption shifts online. Second, AT&T currently derives the majority of its revenue from the sale of phone services, but the company wants to open up new revenue sources outside this market.

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