Market Insight

AT&T and Quickplay - as much about OTT as it is about hedging, diversification, and tech capture

May 25, 2016  | Subscribers Only

Merrick Kingston Merrick Kingston Associate Director, Research & Analysis, Digital Media & Video Technology

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AT&T is set to acquire OTT solutions and managed-media- services provider Quickplay Media. Although the terms of the deal are unknown, the sale almost certainly surpasses USD 100m in value; private equity group Madison Dearborn Partners purchased a majority stake in Quickplay in Q3 2012 for roughly USD 100m. 

Our Analysis:

The industry seems content see this acquisition strictly in the light of DirecTV’s OTT ambitions. Given Quickplay’s prowess in fully-managed, live and non-live streaming solutions, the presumption is that Quickplay will form the technology bedrock for the launch of DirecTV Now, Direct TV Mobile, and DirecTV Preview.

This rationale is eminently sensible, and there is little doubt that Quickplay’s technology will allow AT&T to fire a shot across Sling TV and PlayStation Vue’s bow, as well as challenge the relative ‘incumbency’ of millennial-focused Go90 and Watchable services from Verizon and Comcast, respectively.

By the same token, this view of the acquisition is overly facile, and misses a broader trend in the pay TV business. Over the past three years, US operators have shown a voracious appetite for technology platforms and distribution companies. We’ve seen Verizon purchase a CDN (EdgeCast) as well as sophisticated advertising assets (in the form of Aol), while Comcast has run amok in the ad tech space (Freewheel, This Technologies) and in the OTT solutions segment (thePlatform).

These acquisitions underscore a multitude of strategies that reflect more than a mere desire to launch an OTT service.  

First, we’re seeing acquisition as a method of achieving inextricability. In purchasing advertising assets, Comcast and Verizon have embedded themselves within a part of the value chain that is bound to the media ecosystem in its near entirety.  Direct-to-consumer services that would otherwise compete with traditional pay TV viewing may now find themselves depending on operator-owned technology to monetize their own viewership.

Second, we’re seeing acquisition as an exclusionary mechanism. To purchase an online video platform is to take possession of a technology stack that other firms cannot use – at least without the parent operator’s consent – to offer services that compete with traditional pay TV consumption.

Third, there exists a diversification element here that, despite not serving as the primary acquisitive impetus, still deserves mention. The operator and telecoms business is not, by any stretch, strictly consumer facing. Companies like AT&T and Verizon operate global CDNs, and offer a variety of services to enterprise clients. For AT&T specifically, the ability to add media-management and video-processing capabilities to its distribution business will allow the company to pursue new enterprise and brand opportunities, as well as to compete more effectively with Verizon’s comprehensive VDMS portfolio. 

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