Scrambling to keep pace with consumer trends, established media companies are accelerating their push into the Internet video streaming business.
The trend was highlighted this week by a flurry of deals announced by major media companies, including Sony, Disney, Time Warners HBO and AT&T.
Entertainment companies are eager to hold on to consumers considering cutting the cable cord. They also hope to appeal to consumers who live in an estimated 10 million to 15 million homes in the U.S. that have high-speed Internet access but do not subscribe to a pay-TV subscription. And they also would like to beat Internet streaming pioneers Netflix and Hulu at their own game by fashioning more robust services.
The methods that consumers are engaging with content is changing rapidly, Tony Goncalves, AT&T Entertainment Group senior vice president for strategy and business development, said in an interview Wednesday. And we need to make sure that we are adapting to those changes.
The Dallas phone giant this week said it will begin offering DirecTV service without a satellite dish later this year. AT&T which last year became the nations largest television provider with its acquisition of DirecTV plans to offer Internet streaming services, including one service tailored for mobile phone users.
The intent is to reach new customers, including legions of young adults who have little interest in paying for a traditional TV bundle.
We expect the number of skinny bundles to increase meaningfully over the coming year from new and existing distributors, media analyst Richard Greenfield said in a recent report.
Major entertainment companies also are making lucrative bets that millions of TV viewers who live outside the U.S. will want to subscribe to a branded streaming product to feed their large appetite for Hollywood shows and movies.
For example, HBO on Wednesday announced it was expanding its stand-alone Internet streaming service, HBO Now, farther into Latin America by launching services in Brazil and Argentina.
The Time Warner Inc. division already has made its streaming service available in nine markets, including Mexico, Colombia, Hong Kong, Denmark, Sweden, Norway and Finland.
When we looked at Brazil, we saw huge opportunity there, and same with Argentina, HBO Chief Executive Richard Plepler said at an investor conference. This is a case-by-case, follow-the-money, and think-long-term growth strategy, he said.
Not to be left out, Disney said Wednesday that its popular ESPN and ABC networks were now available on Sonys streaming service, PlayStation Vue.
The PlayStation Vue service, launched about a year ago, is available through the tech companys gaming consoles, as well as other devices, including iPhones and iPads.
It was designed to provide its users wide access to traditional TV programming without requiring them to subscribe to a pay-TV package.
Sony hopes the addition of Disneys programming, first announced in November, will make its offering more attractive to consumers, especially those who want access to sports content.
PlayStation Vue, which is available in seven cities, said it would be cutting the monthly cost of its lowest price service to $39.99 from $49.99.
Media companies have been more aggressive about expanding into the streaming space since last summer. Since then, major entertainment companies stock has been under pressure as investors worry about the ramifications of cord-cutting and so-called cord shaving, which is when customers trim their pay-TV offerings to save money.
During the last two years, the number of pay-TV subscribers in the U.S. has slipped nearly 3 percent, according to data presented this week at a Morgan Stanley investor conference in San Francisco.
Consumers are making choices and trade-offs, said Todd Supplee, a partner in PwCs entertainment and media practice. Consumers are dictating what they want, and they are looking for a better experience and more on-demand programming. And these companies are trying to hold their position.
AT&T has not released details about its planned new offerings, in large part because the company must hammer out agreements with its traditional programming partners.
But the company said it would introduce three streaming options during the fourth quarter of this year, including DirecTV Now, which will include many of the channels that a traditional DirecTV subscription offers today. The second option will be DirecTV Mobile to enable phone users to watch premium video on their smartphones even if they have a carrier other than AT&T Wireless.
This is an attempt for us to bring premium video entertainment to folks who have cut the cord, are considering cutting the cord or have never even been in the pay-TV ecosystem, Goncalves said. This is another essential step in our companys plan to redefine what the bundle means.
For AT&T, offering digital services was one of the main motivators for the companys $49 billion purchase last year for DirecTV.
Consider that AT&T now has 26 million subscribers to its TV services and an additional 130 million mobile phone subscribers.
Goncalves said AT&T believes that consumers see the value in TV channel services, particularly if they offer convenient access programming on different devices.
Programmers, cable networks, continue to lose subscribers well in excess of overall industry cord-cutting, implying that cord-shaving is the industrys primary challenge, said Greenfield, the media analyst.