AT&T - Digital Spend
AT&T is currently investing in several digital areas, adding up to approximately $20-30 billion annually. These investments are primarily focused on entertainment, technology improvements and other areas. They also include a number of acquisitions, particularly in video streaming and video streaming support.
Most of AT&T’s investments are in capital expenditures and acquisitions. According to their 2016 annual report, $22.4 billion was spent on capital expenditures in that year alone. Much of their focus is in digital transformation projects, from streaming content and mobile access to even virtual reality and augmented reality.
AT&T seems to be putting the vast majority of their investments into video streaming. This is based on the number of video services that they have acquired in the last two years, as well as the money spent on those acquisitions.
One of the company’s recent major acquisitions was DirectTV. In addition to the standard options for DirectTV, AT&T added Data Free TV, which allows subscribers to watch on their mobile devices without data charges. They then launched DirectTV Now, a multi channel video streaming service, which garnered over 200,000 subscribers in the first month. DirectTV was purchased for $49 billion alone in 2015. This expenditure is more than the average given above, but is included due to its importance.
Otter Media is a digital holding service that is a $500 million joint investment between AT&T and The Chernin Group. Subscription services held by Otter Media include Crunchyroll (a very popular anime streaming service), Fullscreen, Gunpowder & Sky, and Hello Sunshine. These services with the help of more popular ones like Crunchyroll have a combined 2 million paid subscribers. Additionally, Fullscreen includes the digital studio Rooster Teeth, which “developed industry-respected and consumer-delighting IP, and has become 'the' benchmark of success for the video industry” By investing in these services, AT&T can ensure a steady revenue stream.
AT&T is also investing heavily in their infrastructure, both to support the previous services and to provide faster speeds.
AT&T acquired Quickplay Media as the “underlying distribution infrastructure for its DirecTV over-the-top video offerings, like its upcoming Internet-based “DirecTV Now” subscription video app and its free, ad-supported “DirecTV Preview” service.” Having this underlying infrastructure will allow viewers to easily and quickly access their entertainment. AT&T did not disclose how much was spent on this acquisition, but Fortune estimates that it was around $157 million.
Another way that AT&T is investing in infrastructure is the acquisition of FiberTower, a high speed network that offers millimeter wave spectrum, which will allow for 5G mobile services. As with Quickplay Media, this acquisition allows for extremely fast access for users.
One of AT&T’s tougher competitors in the streaming video world is Sling TV. The streaming company has 1.2 million more subscribers than DirectTV Now. Some of this is due to Sling TV’s earlier appearance on the market. AT&T is offering Amazon Fire Sticks to anyone who signs up and prepays for a month. The intent seems to be to get more reluctant cord cutters who may not have a similar streaming device.
Customer data collection for predictive algorithms
Figuring out what customers want is a big part of AT&T’s business plans, and that means making a solid algorithm. According to AT&T’s Entertainment’s Chief Technology Officer, Eugene Rodriguez, the engineering teams are currently working on a good algorithm, using the data collected by DirectTV and Otter Media.
There is little data for what kind of investments AT&T is making in terms of finding and nurturing talent. It is safe to assume that some talent was simply acquired when gaining DirectTV and Otter Media. The 2016 annual report also offers the following: “We’re using innovative training and building profiles of future job requirements to help our employees pivot their skills from hardware to software, from legacy wire line to mobile and entertainment, and from data recorders to data scientists.” From this, it is clear that AT&T is investing in talent, even if there is no clear data in terms of money.
Currently, AT&T is attempting to form a merger with Time Warner in the hopes of gaining premium content and more robust infrastructure. However, this is still being negotiated and there is no data for how much the merger would cost or what exactly AT&T would gain from it.
AT&T is making many investments in digital transformation projects and digital engagement projects. The rough estimate of $20-30 billion annually is derived from the above numbers, though the DirectTV acquisition was much higher. Regardless, it is clear that AT&T is hoping to position themselves to benefit from the continued shift to streaming video and other digital entertainment.