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AT&T, Chernin to Launch Subscription Video Bundle, Countering Amazon (EXCLUSIVE)

How do you sell video subscription bundles to young viewers who’ve never paid much attention to traditional cable programming? AT&T and the Chernin Group think they have the answer. The duo is getting ready to unveil a new video subscription bundle targeting viewers interested in anime, video games, niche action sports and other fare off the beaten path, Variety has learned.

The new platform is being developed by San Francisco-based Ellation, which is part of the Otter Media joint venture that AT&T and Chernin formed in 2014. One of Ellation’s key assets has been Crunchyroll, an anime video subscription service that has at least 800,000 paying subscribers.

The plan for the new platform is to combine Crunchyroll with other channels from outside partners, and sell it either as a set bundle or through a kind of a la carte model that mirrors Amazon’s recent video subscription efforts, according to multiple sources familiar with the plans.

Internally, the new platform has been known as “Project X,” but trademark registrations from late last year, as well as more than a dozen domain name registrations, point to a “Vrv” branding. Sources told Variety that Ellation could announce the new platform under this branding as early as this month, with a launch being targeted for later this year.

Amazon launched its own a la carte platform late last year, giving Prime subscribers the option to add third-party subscription channels to their Prime Video service. Aside from premium cable networks like Starz and Showtime, Amazon is also offering paid access to niche players like horror-focused Shudder and CONtv, a network focused on Comic Con coverage. Crunchyroll is notably absent from Amazon’s line-up.

No word yet on which streaming services Ellation would look to bundle Crunchyroll with, what the price of this  bundle would be or what role AT&T will have in selling it. It is not expected to be rolled up together with linear networks currently in the traditional pay-TV bundle.

Another big competitor for the new service is Netflix, which has been licensing more anime content, and is even looking to produce original anime series, which could potentially become a threat for Crunchyroll. Part of the reason of bundling Crunchyroll with other services is to fend off such threats.

Ellation is being led by Tom Pickett, YouTube’s former VP of content. In December, the company quietly hired longtime Sony executive Michael Aragon as its new GM of platform and new initiatives. At Sony, Aragon oversaw the Playstation Network content services, including Playstation Vue, the company’s online TV subscription service — something that will have prepared him well for Project X.

An Ellation spokesperson confirmed the hire of Aragon, but declined to comment any further. An AT&T spokesperson declined to comment.

Some of the domains registered by Ellation for Project X.
Screenshot: Janko Roettgers / Variety

This isn’t AT&T’s and Chernin’s only video subscription bet. Otter Media also owns Fullscreen, which launched its own subscription service targeting fans of YouTube stars like Grace Helbig, Hannah Hart and Shane Dawson in April.

It’s still unclear whether Fullscreen’s content would be distributed through the new service, as there may be little overlap between the two audiences, with Project X squarely targeting male millennials with interest in video games, anime and niche action sports. However, Fullscreen is also home to Rooster Teeth, a longstanding gamer comedy franchise that currently has an estimated 100,000 paying subscribers, which might me a much better fit for a Project X bundle.

When Project X finally launches, it will be the culmination of many years of work for the Crunchyroll team, which began to explore similar ideas even before they were acquired by Chernin at the end of 2013.

Original plans called for a platform dubbed Second TV that would combine Crunchyroll with other niche programming. That name was quickly dropped after Crunchyroll became part of Ellation and its Otter Media umbrella, but the idea of a multi-channel video network lived on.

For a while, Otter considered replicating the Crunchyroll model across other verticals, and license foreign or other types of niche content to build its own subscription channels. But efforts to do so with Korean dramas failed, and the venture shifted course to a model focused working with existing and emerging third-party subscription services.

There’s no word yet on how exactly Ellation is going to unveil its new multi-channel network. However, Pickett is speaking at the TV of Tomorrow Show in San Francisco Tuesday, and Tony Goncalves, SVP of strategy and business development, at AT&T’s Entertainment Group will speak at the same event Wednesday about “AT&T’s video strategy, upcoming OTT services and integration across the company’s various lines of business,” according to the conference program — which may be as good as an opportunity as any to shed some light on the platform.

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