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WarnerMedia Streaming Platform to Launch With Three Tiers of Service, Emphasis on Movies

WarnerMedia’s nascent streaming service will launch in beta form by the end of 2019 with three tiers of programming options, including an “entry-level” package focused on movies.

AT&T unveiled plans for the unnamed service on Thursday during a presentation in New York to investors to talk up the company’s prospects and plans for paying down the considerable debt that AT&T piled on with its $84.5 billion acquisition of Time Warner. AT&T chairman-CEO emphasized that the company is laser-focused on chopping down its debt load to no more than 2.5 times earnings by the end of 2019.

AT&T said WarnerMedia’s SVOD service will offer consumers three options to subscribe, starting with “entry-level movie-focused package.” It will also feature “a premium service with original programming and blockbuster movies” and a third option “that bundles content from the first two plus an extensive library of WarnerMedia and licensed content.”

John Stankey, WarnerMedia CEO, said the company’s goal was to offer programming with appeal to a wider audience than is typically targeted by WarnerMedia’s HBO, Turner and Warner Bros. units.

“We want to broaden the relevant demographic base,” Stankey told investors. “Our goal now is to open the aperture. We want to pick up more content and get more engagement on digital content.”

The Wall Street analysts in the room pressed Stankey on the fundamental dilemma facing the media giants that are aiming to move into the direct-to-consumer arena — the content licensing revenue that will be lost if the company no longer sells its movies and TV shows to outside buyers in favor of keeping it exclusive to its proprietary streaming platform. Stankey was clear that WarnerMedia will continue to sell programming in international markets for the near term as well as selectively on the domestic front.

“We’re not going to take all of our content and hold it for ourselves,” he said.

At the same time, Stankey hinted that the prevailing trends in the industry will make it harder for Netflix and other companies that don’t have a vast content library at their disposal to keep their services flush with premium programming. WarnerMedia, Disney and others are increasingly focused on building their own direct-to-consumer platforms rather than cashing checks from Netflix, Amazon et al for mammoth licensing deals

“Some incumbents in that space should expect their libraries are going to get a lot thinner,” Stankey said. “Think about what happens in the next 18 to 24 months. We’re going to see a pretty substantial structural shift that is going to occur.

On Monday, WarnerMedia named Brian Bentley, formerly head of marketing for DirecTV and AT&T Entertainment Group, as general manager and exec VP of direct-to-consumer development to oversee the streaming service. There’s much speculation in the industry about who WarnerMedia might tap to oversee programming for the venture, which is expected to also license content from outside providers.

AT&T chairman-CEO Randall Stephenson emphasized that the company is laser-focused on chopping down its debt load to no more than 2.5 times earnings by the end of 2019. The debt as it stands now, at $170 billion, is about 2.8 times earnings.

AT&T is looking at asset sales to speed up the debt reduction process, and one of the non-core items on the table is the 10% stake in Hulu that AT&T inherited from Time Warner. Disney is about to acquire a majority interest in Hulu through its acquisition of 21st Century Fox, which means Disney is the likely buyer for AT&T’s interest. (Hulu at present is a joint venture of Disney, Fox, Comcast and AT&T.)

“We are focused on one thing in 2019 and that’s getting to 2.5,” Stephenson told the crowd.

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