WarnerMedia provides SVOD details, hints at ad-supported streaming service

AT&T is hosting an analyst day to discuss its strategy and plans for 2019, including new details about WarnerMedia’s Netflix-competing streaming service.

WarnerMedia said its direct-to-consumer product, currently scheduled for a beta launch in the fourth quarter of 2019, will feature three distinct tiers of service. An entry-level product will focus on movies, a premium service with original programming and “blockbuster movies,” and a third service that bundles content from the first two plus an extensive library of WarnerMedia and licensed content.

The company said the SVOD service will complement WarnerMedia’s existing businesses including Turner, HBO and Warner Bros. The company expects the SVOD will benefit its current distribution partners, expand the audience, increase engagement around its content, and provide data and analytics.

John Stankey, CEO at WarnerMedia, said the SVOD platform could attract other content companies looking for different ways to distribute their content.

Despite the direct-to-consumer plans, WarnerMedia said it’s still well positioned with its existing wholesale distribution of content. The company also hinted at a potential advertising-supported video on demand service in the future.

WarnerMedia expects to continue growing its top- and bottom-line and to be accretive to AT&T’s adjusted EPS in 2019.

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AT&T also provided some updates about its video services within the entertainment group.

AT&T is eyeing increased profitability in OTT video thanks to recent DirecTV Now price increases, lower content costs and adjustments to promotions. The company is expecting negative net subscriber adds at DirecTV Now in the fourth quarter of 2018 and in 2019.

On the traditional video distribution side, AT&T said it’s anticipating a $1 billion improvement in linear video revenues driven by the remaining 2 million subscribers rolling off two-year price locks and increased ad revenues from Xandr.

But as the two-year price locks roll off, AT&T is expecting a decline in linear video subscribers in 2019 consistent with the pace of decline in the third quarter of 2018.

That forecast suggests AT&T’s traditional video subscriber base could dramatically decrease in 2019. That’s based on the 346,000 net pay TV subscriber losses the company posted during the third quarter. If DirecTV Now growth slows more or swings to quarterly losses in 2019, AT&T’s traditional video subscriber base could be in for an even bigger hit in 2019.