At INTX, AT&T hints at its DirecTV vision for the future of TV

Mike Dano

BOSTON -- Here at the INTX show, there's plenty of discussion about "the future of TV." The issue in question, of course, is how the nation's cable operators will continue to play in the market they once dominated but that is now in a state of upheaval due to the large and growing number of streaming players like Netflix, Amazon, Roku and others.

AT&T may have an answer. The carrier in the fourth quarter of this year will release the first version of what I'll call DirecTV 2.0, essentially the combination of AT&T's U-verse and DirecTV video businesses. After becoming the world's largest pay-TV provider through its acquisition of DirecTV last year, AT&T is now working to reimagine its legacy U-verse video business with a new DirecTV-branded offering that is built specifically for the OTT realities of 2016.

So exactly what is AT&T building? What does TV 2.0 look like, according to the company?

"It's just TV," Tony Goncalves, SVP of strategy and business development for AT&T's Entertainment Group, told me here. "I've pushed product and tech teams to push massive differentiation at the UI level [in previous jobs]. But when you just take a step back, when somebody opens an app to consume video, what's the first thing they do? They consume video. So getting consumers to their content quickly, effortlessly and seamlessly is the user experience goal."

Goncalves said that AT&T is working to design its new service so that it can send video over satellites, wired and wireless connections, and on whatever device consumers may want to use. He also said the service will be available on both "managed" networks that AT&T owns, as well as "unmanaged" networks that are operated by the carrier's competitors.

"Historically these video platforms have been built for TV and managed networks first," Goncalves said. "So they've been built for set-top boxes and highly managed environments. And mobile came second. Our approach here is that, if you can do unmanaged really well, you should be able to hit it out of the park with managed. If you can do mobile really well, you should be able to hit it out of the park with a big screen and set-top box."

"So we're developing for mobile and unmanaged first," he said.

And he said AT&T is putting a significant amount of effort into making sure its new DirecTV service will work well regardless of users' network connection -- a challenging situation given consumers' expectations of instant entertainment gleaned through decades of channel surfing.

"We're going to get you to that content very, very rapidly, and we're going to make sure that that content plays," he said.

But AT&T's strategy is not just to sell monthly access to on-demand content like Netflix, nor is it to just stream live TV to internet users like Sling TV. Instead, the company is building a "funnel" designed to gradually ease new users into the pay-TV ecosystem -- or cord cutters back into it.

Importantly, Goncalves stressed that AT&T's forthcoming DirecTV 2.0 will focus on regular TV content and not the kind of short-form, YouTube-style content Verizon appears to be gathering for its own Go90 mobile video service.

AT&T's "funnel" will start with DirecTV Preview, which will be a free OTT service on both mobile and wired connections. Goncalves said the free service would largely offer premium, on-demand content alongside "high quality" short-form content (like TV show clips), and would be supported by ads.

Next, AT&T will work to shunt users to its next tiers of service: DirecTV Mobile (premium video and made-for-digital content) for mobile users, and DirecTV Now for both wireless and wireline viewers. DirecTV Now will sport on-demand and live programming from many networks across a range of content packages.

Finally, the top tier will be the managed DirecTV service that is essentially regular premium TV, with a DVR and all the premium content.

"So our approach to OTT is not to minimize or alter the content that we are providing to consumers today," Goncalves said. "We're bringing high quality content -- that is typically only found in a pay-TV bundle -- to the masses."

AT&T will first release the unmanaged, OTT DirecTV product -- for both wired and mobile users -- in the fourth quarter of this year. Then in the first half of 2017, the company will release the first major revision to that initial product, which Goncalves said "will be much more robust." Then, near the end of 2018 or early 2018, AT&T will release the "full blown" DirecTV platform, for both its own managed network as well as networks it does not directly manage.

To be clear, none of this is all that revolutionary. Many of the components AT&T will launch are already available from other companies in some form or another. But the key element here is that AT&T is targeting the pay-TV space with a very specific and deliberate strategy. Rather than tweaking its existing products to react to competitors, AT&T is largely starting fresh with a well-known TV brand, and it's headed to market with full knowledge of OTT's effects on the legacy pay-TV industry as well as information on the streaming innovations that have worked (Netflix) and those that haven't (Redbox Instant).

Further, "premium content" isn't the only lever AT&T can pull to entice customers to DirecTV. For example, the carrier is already offering unlimited data to its wireless customers who also sign up for DirecTV.

But there is a lot riding on Goncalves and AT&T's DirecTV push. The company paid roughly $49 billion for DirecTV last year, and is clearly priming the pump for its OTT service by announcing it months before it is scheduled to arrive in the market.

And the launch will undoubtedly be closely watched by a cable industry hoping to fend off continued advancements by streaming vendors as well as telco and satellite providers. Indeed, John Stankey, CEO of the AT&T Entertainment Group, was given a keynote-level speaking slot here at INTX this year.

The real question, though, is how the cable industry will react to DirecTV. It's that response that may well decide the future of TV. --Mike | @mikeddano

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