AT&T's Stankey: Company will end up spending more on content after DirecTV purchase

Belying his company's earlier claims that its proposed purchase of DirecTV (NASDAQ: DTVcould yield synergies of around $1.6 billion in regard to programming acquisitions, AT&T (NYSE: T) Chief Strategy Officer John Stankey said content costs could actually increase for the combined company if AT&T's ambitious programming goals are realized.

Speaking Tuesday at the Bank of America Merrill Lynch Media, Communications and Entertainment event in New York, Stankey said the "absolute dollar amount we spend on content will probably go up, but we'll be investing in a lot more business models."

In short, Stankey says AT&T will be able to far more cheaply provide programming for the base of nearly 6 million U-verse video subscribers the company "paid through the nose" to build.

But AT&T's programming ambitions don't stop there. Beyond a pay-TV subscriber base that would swell to nearly 28 million in the U.S. with the DirecTV acquisition, the company also has a network of 100 million wireless customers it's seeking to program for.

While that scale drives down costs for producing and acquiring content, it also provides AT&T with programming opportunities it might not otherwise enjoy.

"We can now provide [content makers] a distribution service very few people can offer," he explained.

AT&T, Stankey added, wants to build "multiple legs of a stool," starting with premium sports content, such as DirecTV's NFL Sunday Ticket. He said the relationship with former News Corp. president and COO Peter Chernin provides the other "legs." One of those would be niche programming, such as foreign melo-dramas or sports leagues—over-the-top video designed to serve specific audiences of 4 million-5 million viewers.

Snack-sized premium short-form video aimed at Millennial wireless users would constitute another leg of the stool, and a premium SVOD service would be the other.

"This is a great opportunity to start building on that 100 million-handset mobile audience," Stankey noted.

For more:
- listen to this AT&T webcast

Related links:
AT&T's Stankey: 'We're not the victim' in Q3 competition
AT&T: DirecTV buy will save it 20% on programming costs

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