By Kenneth Li
(Reuters) - AT&T Inc (NYSE:T) is preparing to launch a subscription video service by the end of 2019 that will offer movies and TV shows from Hollywood's biggest library, as well as licensed programming from other companies and, within a year, original content, a top executive told Reuters.
The service, to be anchored by HBO, will include everything from film classics like "Casablanca" to the "Harry Potter" and "Batman" franchises to TV series "ER" and "Pretty Little Liars."
It is still in the planning phases and AT&T, the No. 2 U.S. wireless carrier, has not yet articulated how it will be structured or how it will be staffed.
The announcement of the service delivers on a promise AT&T made in June after shareholders approved the telecom company's $85 billion purchase of Time Warner in order to make more money selling products directly to consumers rather than just go through middlemen such as cable companies.
"When we first discussed the benefits of combining WarnerMedia with AT&T, we saw the ability to create new consumer choices centered on unmatched options, value, quality, and experiences," John Stankey, WarnerMedia Chief Executive, wrote in the memo.
But Stankey envisions a service that appears broader and more ambitious than just a repository for WarnerMedia-branded programming. In an interview, he said that over time he hoped to create a platform in which other companies would be "a part of the family."
The strategy, which appears to resemble Hulu, a subscription video service in which AT&T owns about 10 percent along with partners Walt Disney (NYSE:DIS) Co and Comcast Corp (NASDAQ:CMCSA), follows a similar philosophy to AT&T's plans to create an advertising platform for the TV industry.
The advertising business, recently renamed Xandr, a nod to telecoms company's founder Alexander Graham Bell, aims to create a marketplace to buy TV advertising that mimics the targeting abilities of internet advertising. Cable companies Altice USA and Frontier Communications (NASDAQ:FTR) have signed on.
Over time, Stankey said he expects to introduce advertising support content as well.
AT&T plans to finance the new service through "incremental efficiencies" at WarnerMedia, the company said in an SEC regulatory filing on Wednesday.
Stankey said he sees either bundling other WarnerMedia services or folding smaller services into the new product.
The company has also not yet set a price.
The announcement answers a few questions about how it plans to take on rivals Netflix Inc (NASDAQ:NFLX) and Amazon.com Inc (NASDAQ:AMZN) which have created thriving businesses streaming movies and shows directly to consumers and Disney. which is spending $71.3 billion on buying Twenty-First Century Fox to do the same.
Media conglomerates including AT&T and Disney have raced to catch up to Netflix which now serves more than 135 million subscribers globally and 58 million in the United States.
In an internal meeting over the summer that was leaked to the press, Stankey, an AT&T veteran, suggested a radical expansion of HBO, which rankled insiders fearful that its new owners would destroy a brand known for its high quality.
The launch of a new service that is expected to be bundled with but not exist as a division of HBO is seen helping to preserve HBO's reputation as a premium brand which has historically attracted Hollywood's hottest talent.
The new service will join other WarnerMedia direct to consumer businesses that include the recently launched DC Universe service for comic book and animated series fans and the FilmStruck classic movies service.