AT&T's Streaming Strategy Needs a Lot More Clarity
When AT&T (T) spent $85 billion to buy Time Warner (now known as WarnerMedia), it got its hands on HBO. And that meant the telecom giant got its hands on a direct-to-consumer (D2C) streaming service (HBO Now) that reportedly had over 5 million subscribers as of early 2018, as well as a streaming service (HBO Go) that's bundled with a very popular pay-TV channel.
Given the kind of entrenched and deep-pocketed competition it's facing in the D2C streaming world, the logical thing for AT&T to do here is to build on the success that HBO and its powerful brand have seen to date. Create new originals for HBO's streaming services, lean on Time Warner's treasure trove of non-HBO shows and movies to bolster each service's library and strongly promote each service to AT&T and DirecTV subscribers, while keeping its pricing at least in the same ballpark as Netflix's (NFLX) .
It looks as if AT&T's streaming strategy will in some ways resemble this playbook, but it's far from clear just how much it will do so. In November, Ma Bell announced it plans to launch a 3-tier WarnerMedia subscription service, starting with a beta app in Q4 2019. CEO Randall Stephenson later added that the service will be "centered on the HBO platform."
The service's cheapest tier, which might be ad-supported, will contain HBO's movie library. The second tier will add "original programming and blockbuster movies," including popular HBO originals such as Game of Thrones. And the third tier will add "an extensive library of WarnerMedia and licensed content." With WarnerMedia possessing assets such as DC Comics, TBS, TNT, Looney Tunes, Harry Potter, Lord of the Rings, Friends and The Cartoon Network, there are plenty of options for adding content to the third tier.
This week, Turner Entertainment Kevin Reilly tried to provide some more color about the WarnerMedia service's content plans. He stated "destination assets" such as Friends, which remains licensed to Netflix until 2020, will likely be exclusive to the service in time. Also mentioned: Originals will arrive in 2020, and they'll ultimately include original DC content.
However, AT&T still hasn't shared what its service will be called or to what degree will it leverage the HBO brand. The company also hasn't shared whether HBO Now and HBO Go, which effectively offer what's promised for the second tier, will continue to be separately run or merged with the new service.
And perhaps most importantly, AT&T hasn't shared how it will price its three service tiers. With HBO Now already costing $15 per month -- $2 more than Netflix's popular Standard plan even after Netflix's recent price hike -- and October comments from WarnerMedia CEO John Stankey suggesting the service's third tier will cost more than HBO Now, there's a risk that the service will be priced too high -- particularly with Disney (DIS) promising its upcoming Disney+ service will initially be cheaper than Netflix.
Given how much scale and consumer mindshare Netflix and Amazon (AMZN) have built up for their streaming services, given that Disney will be launching what's likely to be a competitive offering around the same time and given that there's a limit to how many streaming services the average household is willing to pay for, AT&T has a limited margin of error for its streaming efforts. And for now, it's fair to wonder if AT&T will stay inside of that margin.
How Amazon Might Use the Wi-Fi Startup It's Acquiring
Feb 12, 2019 | 6:29 PM EST
Though one can debate whether networking hardware maker Netgear (NTGR) deserved to drop 15% on news that Amazon.com (AMZN) is buying Wi-Fi startup eero, it's easy to understand why Netgear investors are on edge about the news.
Eero offers mesh Wi-Fi systems that consist of a main router (known as the eero) that connects to a broadband modem and secondary routers (known as eero Beacons) that can communicate with both the main router and each other. Reviewers have generally praised the ease-of-use of eero's systems and their ability to blanket a home with Wi-Fi coverage, albeit while often taking issue with their pricing (a system featuring one eero and two Beacons costs $399, while a system with one of each costs $299).
It wouldn't be surprising to see eero's lineup getting a price cut or two in the coming months. Amazon has never cared much about directly profiting from hardware sales -- rather, it has traditionally used hardware as a means of keeping consumers hooked on its many services. And with headline for the press release announcing the eero deal stating Amazon is doing it to "help customers better connect smart home devices," the company apparently sees an opportunity to use eero to grow uptake for Alexa-capable IoT hardware.
Perhaps a more worrisome possibility for Netgear and other home Wi-Fi router suppliers than mere eero price cuts: Amazon could bundle eero routers with other hardware such as Echo speakers. Or it could take things a step farther and use eero's technology to launch Echo speakers featuring built-in mesh Wi-Fi routers.
As it is, Echos are often deployed throughout a house (and work in unison) in a manner not too different from mesh Wi-Fi systems, and a pair of newer Echo products -- the Echo Plus speaker and the Echo Show smart display -- can act as smart home hubs for devices relying on Zigbee radios. Adding mesh Wi-Fi routing to the mix doesn't sound too far-fetched, provided Amazon can engineer the devices to deliver adequate Wi-Fi performance.
As others have pointed out, there are also some other ways that Amazon could leverage eero. Eero currently sells a $99/year network security service (known as eero Plus) that includes VPN access, a password-manager and antivirus software; Amazon could conceivably sell it for a discount to Prime members and/or bundle it with the home security services provided by smart doorbell/camera maker Ring, which Amazon bought last year. And -- though this would raise privacy concerns -- eero's routers could provide Amazon with data about what devices are connected to a home Wi-Fi network.
Qualcomm (QCOM) , which has been supplying the Wi-Fi chipsets that go inside of eero's routers, could benefit a little from the Amazon/eero deal. And to the extent that the deal helps grow sales of Wi-Fi-capable smart home devices, it could be a positive for Cypress Semiconductor (CY) , which remains the top supplier of Wi-Fi/Bluetooth connectivity chips for IoT devices and counts Amazon as a client.
EA's Apex Legends Is Making Fortnite Look a Little Less ScaryFeb 12, 2019 | 12:35 PM EST
Six days has made a world of difference for the investor narrative around Electronic Arts (EA) .
Last Wednesday, EA and other game developers nosedived after EA and Take-Two Interactive's (TTWO) earnings reports stoked fears that Fortnite, private-held Epic Games' incredibly successful battle royale title, is upending the industry. However, after tacking on another 5% gain on Tuesday, EA is now up 27% from its Wednesday close, more than recovering its post-earnings losses.
The turnaround has quite a lot to do with the initial reception seen for Apex Legends, a Fortnite rival that launched on Feb. 4. Last week, EA disclosed that Apex Legends, which like Fortnite is free to play and monetized via in-game purchases, had seen 10 million players sign up in its first 72 hours. Today, the company announced sign-ups have topped 25 million.
In addition, with the help of the initial spike in interest that often accompanies a hot new title, Apex Legends is for now the most-watched game on Amazon.com's (AMZN) Twitch game-streaming service. As of the time of this post, Apex Legends has 332,000 viewers, and Fortnite (Twitch's fourth-most-popular game) has 73,500.
Apex Legends still has a ways to go before its popularity matches that of Fortnite, which had 78.3 million monthly players last August and topped 200 million registered users in November, and in some ways has evolved into a social platform. However, its initial success is a breath of fresh air for EA, which has been hurt not only by Fortnite's success but also a weak reception for first first-person shooter Battlefield V.
Moreover, even if Apex Legends only ends up being about half as successful as Fortnite, its reception would still be a clear sign that Wall Street's Fortnite-related fears were overdone. As I argued last week following Wednesday's plunge, it isn't guaranteed that Fortnite (for all its groundbreaking aspects) will maintain its current level of popularity over the long-term. And so treating it as a doomsday event for a massive industry that features many popular gaming genres and still has secular growth drivers felt mistaken.
Indirectly, Apex Legends' initial success is a positive for Take-Two and Activision Blizzard (ATVI) , to the extent that it raises hopes that one or more other major game publishers can launch a successful rival to Fortnite. Both companies have already added battle royale modes to popular games, and additional moves seem likely.Activision, it should be noted, continues trading below its Wednesday low going into Tuesday afternoon's Q4 report, thanks in part to reports that the company is planning layoffs. The company could offer some color during its earnings call about its plans for taking on Fortnite and Apex Legends.