1. AT&T Reveals The Three Faces Of Warner

While the industry awaits the “Attack of the Giant Flixes” one of the biggest questions has been what those “Flixes” will actually look like from a business perspective.

And now we know.

Sort of.

AT&T CEO Randall Stephenson announced that WarnerFlix would have three different tiers, with the seemingly universal takeaway being that they would be ad-supported in some way, shape or form. (Because Xandr.) Current thinking is that they will likely do a Hulu-style model with ad-free and ad-supported versions.

According to Stephenson the three services will be:

(A) An “entry-level movie-focused package.”

(B) A “premium service with original programming and blockbuster movies.”

(C) A mega-combo package “that bundles content from the first two plus an extensive library of WarnerMedia and licensed content.”

Why It Matters

Warnerflix, which we’ve been describing as “HBO on Steroids” is likely going after several different targets.

The “A” level sounds like it’s going to rely on both Warner’s movie library and AT&T’s existing library of older movies (MVPDs frequently have sizable libraries from those pre-Netflix days when they thought VOD was the future.) That service will compete with Roku TV, Tubi TV and other free ad-supported services. If AT&T is planning to charge for it, they’ll have to come up with a reason why it’s superior.

The “B” level sounds a lot like HBO bulked up, with more original programming and a better selection of current movies. That’s going to be a compelling offer, especially if AT&T can offer movies that are normally only available for rent on Amazon’s complex subscription/transaction Prime platform.

The “C” level sounds like it’s A + B, with all of TBS and TNT’s library content, plus whatever TV shows Warner Studios has the rights to, plus (maybe) some library and original programming from CNN.

What’s interesting is that none of the options sounds like a replacement for pay-TV, which is something AT&T could do with package “C” by adding in a live feed of CNN: sports fans would still need to look elsewhere, but having that many options (movies, HBO, TV series, new originals) plus a news feed might be all that a lot of people decide they need. (Well, that, plus some combination of Netflix, Amazon, Hulu and Disney+.)

Which is likely why AT&T isn’t ever going to offer it—given how rapidly Direct TV is bleeding viewers (down almost 350K last quarter) the last thing AT&T wants to do is give them more reason to defect. Especially since they are hoping to make their vMVPD, DirecTV Now, an integral part of the pay-TV package of the future and are in the process of migrating all their current Uverse and Direct TV customers to DirecTV Now.

What You Need To Do About It

If you’re an advertiser (and we’re right about the ad-supported part) this is a great opportunity to check out what AT&T is doing with Xandr, which will no doubt be a major part of the ad offering on any of the new services. As one of their initial customers, Xandr will likely go out of its way to make sure you have an excellent experience, so coming on board early could make a lot of sense … provided the numbers hold up.

If you’re Disney, you’ll want to hope that those rumors about AT&T selling off its 10% stake in Hulu prove to be correct. There’s really no reason for them to hold on to it, especially since, once the new Warnerflix service launches, they’re not going to be selling Hulu any library content, well, at least not after the current contracts run out.

If you’re Netflix, you’ll want to pay heed to the words of Randall Stephenson who took a not-very-thinly-veiled swipe at you when he said that “Some incumbents in that space should expect their libraries are going to get a lot thinner.” (i.e., you can forget about all those reruns of popular 80s, 90s and 00s series you now show.)

That wasn’t a threat as much as a statement of fact and something that Netflix is hopefully dealing with: as we’ve noted before, much of what’s watched on the streaming platforms is “Comfort Food TV”—reruns of popular series, where viewers already know the show and the characters, have likely seen the episode previously and thus don’t have to invest a whole lot of time and effort into watching it again. Original series, OTOH, are a huge ask and a huge investment of time and energy, and so Netflix needs to hope enough viewers are willing to make that leap.

Or at least think they might make that leap in a way that causes them to not unsubscribe.

 

2. Pluto Discovers Europe

Pluto, the fast-growing free ad-supported OTT service, is (a) adding on programming from Discovery, and (b) expanding into Europe. (Well, the UK, anyway, which is still a part of Europe. For at least the next few weeks, anyway. #BREXIT.)

Why It Matters

As we’ve noted, free ad-supported OTT services are booming (You know, someone ought to write a Special Report about the whole ad-supported OTT ecosystem. Oh wait, we are. Look for it in January.)

Of all the FASTS, (just made that up: Free Ad-Supported Streaming TV Services) Pluto has been one of the more interesting ones because it includes a linear feed, something that looks a whole lot like traditional pay TV, only free and delivered over the open internet.

Until now, Pluto’s offering was mostly network reruns and old movies with some YouTube-y filler thrown in. But with the new shows from Discovery—Discovery Channel’s “Misfit Garage,” TLC’s “Kate Plus 8,” Animal Planet’s “River Monsters” and ID’s “Dates from Hell” are among the shows they're picking up—Pluto's offering starts to feel even more current, and gives viewers even more reason to avoid finding the TV remote so that they can switch the input back to the set top box to watch old school cable.

It’s a smart move, and coupled with international expansion, is yet another reason for the industry to take Pluto and the other FASTS seriously.

What You Need To Do About It

If you’re an advertiser, Pluto offers an engaged and easily measurable audience, one that’s actually taken the time to track Pluto down and figure out how to use it. (Not that there’s really anything to figure out, but many people are scared of technology. Big time.)

If you’re a network and you’re looking to cut some syndication deals, take a look at Pluto and its competitors. The FASTS offer a vision of the future of free ad-supported TV, one  where part of the “Spotifyization of Television” theory laid out in Over The Top: How The Internet Is (Slowly But Surely) Changing The Television Industry (shameless plug #2) will likely take shape: personalized linear feeds that begin playing when the user starts watching, much like Spotify Daily Mixes.

And if you’re a viewer, PlutoTV means never having to find the TV remote.

Which can be absolutely life changing.