• by Wayne Friedman , Staff Writer, September 18, 2018

With Time Warner firmly ensconced in AT&T, all eyes turn to the big competition squarely in front of Netflix.

What will it take to compete? Randall Stephenson, chairman-CEO at AT&T, posed a key question while speaking to The Wall Street Journal. He thought shifting TV production resources from Turner networks and its original TV shows to HBO might be a good idea.

“A lot of the content spend is in Turner, specifically TNT and TBS,” he said. “Is that really the highest and best use of capital? Or is it a more appropriate and best use to put it toward HBO?”

In part, we can see where this comes from. Netflix is poised to spend $8 billion on TV shows and movie this year -- likely to climb to near $10 billion next year. Big subscription revenues are at stake.

More importantly, Netflix’s spending rivals are major TV/movie studios. 

This year, MoffettNathanson Research says NBCUniversal will spend $11.4 billion ($7.8 billion for TV content; $3.6 billion for film production), while Walt Disney will spend $9.4 billion ($5.8 billion for TV, $3.6 billion for film); Time Warner, $8.7 million; and 21st Century Fox, $8.6 billion.

Netflix’s streaming service has nearly 60 million U.S. subscribers, with digital OTT service HBO Now well behind at 5 million. But when it comes to traditional pay TV subscribers, HBO has around 140 million subscribers worldwide -- 50 million in the U.S.

Now all this may seem to run counter to what AT&T has invested in: an advanced advertising platform and talent -- the $1.6 billion deal for ad-technology platform AppNexus and the hiring of Brian Lesser, as CEO, AT&T advertising and analytics, from GroupM.

The balance AT&T wants to strike is to use TV content for its ad-supported networks, but also put TV content under premium ad-free networks like HBO, with subscription fees.

AT&T does not consider Netflix the only main competitor -- Facebook and Google are also in its sights. Its advanced advertising metrics and connections to millions of consumers from all its businesses can be used by marketers to rival digital media players.

AT&T will surely make shifts to compete with all these players. But it's the high-profile TV shows and movies that will shine the brightest light for consumers. Will that siren song be a lure?

Maybe that song is already working. To borrow a marketing phrase from years ago: “It’s Not TV. It’s HBO.”