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AT&T Shapes Its Converged Entertainment Future As Time Warner Deal Closure Looms

by David Mercer | Jul 21, 2017

Nine months after announcing its intention to acquire Time Warner, AT&T last weekend opened the doors of the Warner Bros studio in Burbank, CA, to a mixed audience of developers, partners, media and analysts. In amongst the obligatory but always entertaining studio tours (Batmobiles, prop stores etc) and the entertaining and occasionally dazzling techno-illusionism of magicLab’s Marco Tempest we spent time with execs and industry leaders discussing the opportunities and challenges offered to the combined entity, assuming the deal is closed by the end of this year as planned.

Convergence was the undercurrent to the debates. AT&T’s David Christopher said the aim of the event, dubbed “AT&T Shape”, was to “explore the intersection between technology and media” and to create a “melting pot of creativity”. In his view, the entertainment industry would inevitably follow the “wireless path”, and interactivity would lead to improved customer engagement.

As we highlighted in our October 2016 review of the acquisition announcement, managing potential conflicts between the two sides would be one of the new organisation’s key challenges. In response, AT&T execs made it clear that AT&T will not be the dominant culture once Time Warner is acquired, and in fact they expected a new culture to emerge.

They also acknowledged the importance of two key strategic issues facing the content industry: content discovery and advertising. They believe that AT&T’s technology and distribution can help to improve the way consumers find content which meets their needs as well as the way content is monetised and personalised.

In spite of the growing importance of subscriptions, AT&T’s John Stankey agreed with us that advertising would remain a cornerstone of the new company’s entertainment business model, and believed that individual profiling enabled by AT&T’s technology would help to improve its overall effectiveness and value. AT&T will make new technologies available to all its content partners and not only its wholly owned entertainment units.

BBDO’s Andrew Robertson provided some excellent insight into the transformation of the advertising industry. New technologies and social media platforms are enabling improved targeting, based on interests and behaviours, context (such as using Pinterest to reach certain customer groups) and better messaging (specific messages to specific audiences). But his overall conclusion, in spite of these changes, is that creativity will continue to drive 80% of the available return. Whichever technologies or platforms are used, emotions will continue to drive behaviour. As he noted: “We are not Spock. We are Homer.” (In case of doubt, that’s Simpson, not the poet).

Disturbingly, perhaps, for some in the TV industry, Ultra HD and 4K hardly got mentioned. Sports rights owners such as the PGA and NFL focused instead on the importance of social media and the potential for whole-event coverage to improve reach and viewer engagement. VR and AR, as we have heard frequently, are seen as nascent but having great potential.

The Shape event suggested that AT&T is determined to follow up on its belief that the vertical integration of Time Warner would allow it to innovate more quickly. It is also demonstrating awareness of the cultural challenges inevitable in the coming-together of two major organisations. As we noted previously, the new company’s success will hinge to a large degree on maintaining the confidence of the content community and not allowing corporate objectives to intrude on the creativity which fuels success.

David Mercer

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