Preview 2017

How the Cellphone Will Replace the Cable Box

Illustration by: Laemeur

AT&T and other telecoms are making big bets that 2017 is the year mobile (beaming content directly to TVs) becomes the norm.

On Dec. 7, billionaire investor Mark Cuban appeared before Congress and, in defending the $85.4 billion proposed merger of AT&T and Time Warner, proclaimed that mobile apps have unseated TV as "the best alternative to boredom." While idly pulling out a phone to watch a soundless video on Facebook instead of flipping on CNN hardly seems revolutionary, that change in consumer behavior is just the start of what many observers believe will be a radical shift this coming year as the cellphone replaces the cable box.

"In the past, we went to our media," the Shark Tank star noted during the hearing. "Today, our media comes to us." And now it's looking increasingly like the tech and telecom industries will control that delivery. That's the motivation behind AT&T's Time Warner deal, Verizon's plan to buy Yahoo and merge it with AOL and even 21st Century Fox's move Dec. 9 to acquire a majority stake in Sky, the British pay TV and cellphoneservice provider.

Now there's even speculation that Verizon could make a play for CBS Corp. following the broadcaster's scuttled plans to merge with Viacom. (Verizon told analysts it is not interested in such a deal.) And the entertainment industry, not wanting to get caught relying on tech giants like Apple to distribute content for them (as the music labels did with iTunes and later Spotify), is playing along. "The music industry has been a cautionary tale," says Peter Csathy, CEO of media consultancy Creatv. "One distributor held all the power. The more distribution you own, the more power you have with your content."

Underlying all of these moves are the already seismic changes in the media landscape. After years of consistent growth, the pay TV business moved abruptly to full-year subscriber losses in 2013; meanwhile, mobile video, dominated by Facebook and Google's YouTube, is growing so quickly that ad revenue is expected to top $6 billion by 2019, according to eMarketer. In response, the industry has been flooded with over-the-top "skinny" bundle options designed to attract the growing ranks of cord cutters.

There are services from Dish and PlayStation and planned launches from Hulu and Google. AT&T's DirecTV Now service currently offers the most channels (100-plus) at the lowest price ($35 a month). In another sign of AT&T's vision for an all-mobile future, it has introduced a plan not to charge DirecTV Now mobile viewing against a subscriber's data plan, a practice known as "zero rating." Verizon offers a similar discount for streaming video on its go90 app; T-Mobile's Binge On program does the same for Netflix, YouTube and other content.

As video streaming becomes the priority for telecom and tech alike, analysts predict that the push to own content isn't over yet. Some suggest Apple could still make their move on a major studio. Meanwhile, Macquarie analyst Amy Yong has her eye on smaller cellphone carriers such as Sprint and T-Mobile: "I wouldn't rule them out."

This story first appeared in the Jan. 6 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.

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