Categories Analysis, Earnings, Technology

Get ready for movies-on-demand, HBO shows and much more from AT&T

For telecom giant AT&T (T), the acquisition of entertainment network HBO and its parent Time Warner earlier this year came as the first step towards the goal of launching a new video streaming service. The company this week made it official – accordingly, the large collection of HBO shows and content from other Warner channels will be available on demand for home viewing by the end of the next year.

The management plans to fund the new venture mainly through incremental savings from the WarnerMedia business and consolidating resources form various operations including D2C.

While the idea is to emulate the tested and proven business model of Netflix (NFLX), which currently rules the streaming segment, AT&T’s offerings are expected to be costlier, at least initially. HBO and an array of other Time Warner channels will come bundled in the new video-on-demand service.

The large collection of HBO shows and content from other Warner channels will be available on demand for home viewing by the end of the next year

“We are committed to launching a compelling and competitive product that will serve as a complement to our existing businesses and help us to expand our reach by offering a new choice for entertainment with the WarnerMedia collection of films, television series, libraries, documentaries and animation loved by consumers around the world,” said an official statement from the company.

Netflix, meanwhile, has enough time to decide on its strategy since the key factors that are crucial for customer retention – competitive pricing and the scale of content acquisition- will remain in its favor during the initial months after the planned launch. HBO’s spending on original content is merely one-third of Netflix’s $8-billion outlay.

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But, the coming together of the world’s largest telecommunication company and the iconic Time Warner brand could be a game-changing development as far as the American entertainment industry is concerned. Most customers would find the high quality of the new service, which is somewhat assured in this case, irresistible in the long run. However, it will all depend on how effectively John Stankey, the CEO of WarnerMedia who is in charge of the initiative, executes it.

Continuing the ongoing downtrend, AT&T shares retreated from Wednesday’s initial highs as trading progressed and ended the session lower. The stock declined about 7% over the past one year and slid 13% since the beginning of the year. Netflix’s stock extended the loss it suffered in the previous session and traded lower throughout the day before ending the session down 8%.

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