AT&T plans to merge DirecTV Now and WarnerMedia SVOD: report

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Details are continuing to roll out about WarnerMedia’s new streaming service, which reportedly eventually will merge with virtual MVPD DirecTV Now.

According to CNBC, the combined product would have a common search and user interface, and could be offered in a discounted bundle along with AT&T wireless service. The report includes lots of other potential details about the WarnerMedia streaming service including price and launch date.

AT&T is reportedly eyeing a $15-to$18-per-month price range for the service, which wouldn’t put it much further ahead of HBO and HBO Now. At that price the service would include HBO content along with Warner Bros.’ TV series and movies, Cinemax and original content. The report said that once the platform is up and running (it will get a beta release this year before officially launching in 2020), a reduced-price ad-supported option will be added.

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The report also said there will be live content like CNN and sports added to the service. WarnerMedia CEO John Stankey also said that the WarnerMedia streaming service could eventually open up its platform for other streaming services, similar to what Amazon Channels, the Roku Channel, Apple’s new channels service and Comcast’s Xfinity Flex have already done.

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The details in CNBC’s report line up with information in reports from other outlets, including the Wall Street Journal.

Stankey told CNBC that the plan is to grow the WarnerMedia service to about 70 million subscribers. But the service will have lots of competition as it sets about hitting that goal.

Existing streaming services including Amazon Prime Video, Hulu and Netflix already control major parts of the streaming video market in the U.S. and internationally. And, many more streaming video services are launching soon.

Disney+ is coming in November this year and will be priced at $6.99 per month, much lower than the reported prices for WarnerMedia. Also, coming soon is Apple’s streaming service for its original series and movies, NBCUniversal’s ad-supported streaming service and Quibi, a short-form content service that will start out at $5.99 per month.

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“You go in hoping for the best — hoping people will want to subscribe to the new direction and stay,” Stankey said. “It’s the nature of the M&A game.”

The “new direction” Stankey’s talking about is a systematic reorganization of Time Warner, renamed WarnerMedia last year. The goal is to realign the company with the future of media consumption. The foundation of his bet is a new streaming service that merges all three divisions of the old Time Warner — Warner Bros., Turner and HBO. To create his vision, Stankey believes he needs to get everyone working toward a common directive — getting 70 million subscribers paying for the yet-to-be-named streaming platform.

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Failing could be catastrophic. AT&T’s debt load is nearly $200 billion — making it the largest corporate debt issuer in the world. Veteran telecommunications analyst Craig Moffett calls that amount “terrifying.”

“Media has moved into an environment where scale is essential,” Stankey said, citing Disney’s $71.9 billion deal for Fox’s assets (and divestiture of Sky to Comcast) and CBS’s likely upcoming merger with Viacom as other examples of media companies seeking bigger balance sheets with more assets under management. “Somebody in the legacy media space will build a platform of scale and get to 70 million to 80 million subscribers. We’d like it to be us. If you keep the cultures separate, you’ll never get the benefits the three together bring.”

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In addition, AT&T eventually plans to merge its DirecTV Now service with its WarnerMedia streaming service, giving customers a more robust TV offering than anything on the market, the people said. A combined product with a common search and user interface — which, like the standalone streaming service, could also come bundled at a discount with an AT&T wireless subscription — would give customers access to live pay-TV streaming channels and Warner’s library and originals, all in the same ecosystem.

The combination of Warner’s library, Warner originals, live linear channels and other aggregated streaming products may keep customers from leaving AT&T’s platform — the desire of every media company. That product may also help stop the bleeding for DirecTV Now, which has lost nearly 20% of its subscribers in the last six months amid rising prices and rival competition.

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