6 big questions cord-cutters should ask about AT&T's and HBO's next streaming service

AT&T's management shakeup raises new questions about its streaming TV plans.

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Jared Newman / TechHive

Changes are afoot for HBO under its new corporate overlords at AT&T. But what those changes might be are still anyone’s guess.

After longtime HBO CEO Richard Plepler abruptly resigned last week, AT&T executives went on a media tour to talk about the channel’s future, take shots at Netflix, and hint at the streaming service AT&T plans to launch this year. Still, those interviews didn’t reveal much in the way of specifics. If anything, AT&T and HBO’s streaming plans seem even murkier than they did a week ago.

Here’s what I’m still scratching my head over:

Will AT&T launch a streaming service this year?

The timing of AT&T’s direct-to-consumer streaming service, which will combine content from HBO, Turner , and Warner Bros., seems a bit fluid. Last October, AT&T said it would launch the service in 2019. A month later, the company started describing the 2019 launch as a “beta” version, and it noted last month that new original programming won’t arrive until 2020. Earlier this week, Bob Greenblatt, the new head of AT&T’s WarnerMedia unit, told Variety that launching the beta in 2019 is “what we hope to do,” suggesting a lingering degree of uncertainty.

Mind you, this is the same company that launched its “Next-Generation” version of DirecTV Now a half-year later than originally intended, that still hasn’t expanded DirecTV Now’s DVR options (after saying it would do so last summer), and hasn’t delivered on promised DirecTV Now features such as 4K resolution and mobile video downloads. The idea that this new streaming service might also fall behind schedule isn’t unthinkable.

Is the three-tier pricing plan set in stone?

While AT&T hasn’t announced exact pricing for its direct-to-consumer streaming service, executives have described a three-tier system that includes movies for a low price, originals and more films (presumably from HBO) for a medium price, and a bundle of additional films, comedies, and kids programming from Turner’s and Warner’s catalogs for a higher price.

This approach is without precedent in the on-demand streaming world, and it’s reminiscent of the kind of setup people are trying to leave behind with cable. Maybe that’s why Greenblatt hedged a bit when Variety asked him for details on those plans. “How it will be tiered and all of that is still in the working stages,” he said. Perhaps he’ll impress upon AT&T that its original vision isn’t the wisest idea.

Can AT&T get good at making apps in nine months?

Software has never been a strong suit for either HBO or AT&T. The former’s HBO Now apps are a chore to navigate, and they still lack table-stakes streaming service features such as personalized recommendations and user profiles. AT&T’s DirecTV Now apps also lack profiles and personalization (again, even though AT&T put those features on its public roadmap mid-2017), and every part of its app besides the grid-based channel guide feels clunky.

It’s unclear whether AT&T will roll its new service into those existing apps or start from scratch. Either way, the company has a lot of work to do in not much time.

How much content will AT&T pull from other platforms?

John Stankey, the head of AT&T’s WarnerMedia division, has previously suggested that Netflix and other rivals will see their catalogs shrink as AT&T pulls licensed movies and TV shows back to its own services. But while those moves might make AT&T’s service more compelling, they also represent a huge risk for a company with $180 billion of debt that’s trying to pay off $20 billion of it this year.

The need for short-term revenues might explain why AT&T took $100 million from Netflix to exclusively license Friends through 2019. It could also explain why, as Redef’s Matthew Ball points out, AT&T executives have started to waffle on whether they’d give up that kind of easy money in the future. “Part of me would love to have [Friends] exclusive on the service but I’m not sure that is the right answer yet,” Greenblatt told The Hollywood Reporter this week. AT&T might be realizing that the reason Friends is popular right now is because it has Netflix to lean on, not vice versa. That mentality could certainly extend to other movies and shows that are even less of a draw.

How much of a liability is AT&T’s financial situation?

The underlying issue with all these questions is AT&T’s aforementioned debt, accrued largely from buying DirecTV for $48.5 billion in 2015 and Time Warner for $85 billion earlier this year. AT&T’s immediate goal is to focus on profitability, so it can pay down that debt, which is why CEO Randall Stephenson told the Wall Street Journal in January that “2019 candidly is the money year.

At the same time, AT&T’s John Stankey recently told The Hollywood Reporter that he wants the company’s services to be in 60- to 70 percent of U.S. homes. Growing a streaming service to that level of adoption will require major investments in content and aggressive pricing, which means AT&T’s growth and profitability goals are fundamentally at odds.

What does all this mean for you?

To bring it home for cord-cutters, all these questions amount to lots of uncertainty over how you’ll access HBO and other AT&T content in the future. Will HBO Now exist as a standalone $15-per-month streaming service next year, or will prices change as AT&T rolls that content into its new service? Will you still be able to add an HBO subscription to Amazon Prime, or will AT&T pull the channel’s content back into its own siloed apps? And if you enjoy watching WarnerMedia-owned shows like Friends, or movies like The Dark Knight on Netflix, how much longer will that be an option?

Right now, AT&T doesn’t seem to have the answers.

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