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WarnerMedia to Launch Direct to Consumer Streaming Service in Late 2019

AT&T’s WarnerMedia is joining Disney in the race to launch a global direct-to-consumer streaming platform next year.

WarnerMedia CEO John Stankey unveiled the plan Wednesday during his address at the Vanity Fair New Establishment Summit in Los Angeles. Stankey said the company will mine its library and content engines to create such a service by the end of 2019.

The new platform will be fronted by HBO, with content from additional WarnerMedia brands bundled around that premium cable service, Stankey said.

Price for the service will not be determined until the project comes to market, but Stankey said it will be more expensive than the current HBO over-the-top subscription plan (which he said is priced more than fairly, thanks to the “emotional engagement” of WarnerMedia content like “Game of Thrones”).

The CEO also said the content spend at WarnerMedia would be “competitive” to that of Netflix, which stands at about $8 billion, respectively, according to wide reports. Many traditional media brands being transformed by consolidation are arming up to battle Netflix, Variety recently covered at length.

“This is another benefit of the AT&T/Time Warner merger, and we are committed to launching a compelling and competitive product that will serve as a complement to our existing businesses and help us to expand our reach by offering a new choice for entertainment with the WarnerMedia collection of films, television series, libraries, documentaries and animation,” Stankey said in an announcement released ahead of the summit.

In a Securities and Exchange Commission filing, AT&T addressed the significant costs of launching such a venture.

“We expect financial support to launch this product to come from a combination of incremental efficiencies within the WarnerMedia operations, consolidating resources from sub-scale D2C efforts, fallow library content, and technology reuse,” AT&T said in the filing. “We expect to defer some licensing revenues to later periods in the form of increased customer subscription revenues.”

By “sub-scale D2C efforts,” AT&T is likely referring to existing WarnerMedia properties such as Boomerang (featuring classic cartoons), DramaFever (a Korean programming service) and the fledgling DC Universe streaming platform. It’s understood that those ventures will be rolled into the larger new service in an effort to cut operating costs and more quickly aggregate audiences by offering a wider menu of programs.

WarnerMedia’s streaming venture comes as Disney is actively preparing for the launch of its Netflix rival, also targeted by the end of 2019. The consolidation push that drove AT&T to buy Time Warner and Disney’s pending acquisition of 21st Century Fox is fueled by the desire to amass content assets that can feed direct-to-consumer platforms with global scale — following the path forged by Netflix.

Like Disney, WarnerMedia is taking a gamble with the decision to forgo some traditional revenue from licensing TV shows and movies to outside buyers in favor of keeping all of that content in-house to make for a compelling subscription-based offering.

The hope is that the long-term profits from a sizable subscription venture will be greater than the upside the studio has traditionally harvested through syndication sales and international licensing. In the short-term, however, this shift will require patience from investors. A source close to the situation stressed that WarnerMedia will look at properties on a case-by-case basis, and that some content will still be made available to outside buyers.

Stankey seemed more than aware of the cost by comparing the WarnerMedia brands to high-end retail, saying he wanted the service to resemble “a collection of boutiques that meet your particular needs, but all have an understood level of quality.”

CNBC anchor Andrew Ross Sorkin, who moderated the conversation, asked if Stankey suffered any “night sweats” over the possibility that the Department of Justice might successfully be able to reverse the AT&T-Time Warner Merger in appeals court.

Stankey said he’s sweat-free, and has let go of the Trump-infused ordeal to preserve his own “health, sanity and well being.”

Cynthia Littleton contributed to this report.

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