AT&T’s $500M online video pact with the Chernin Group: it’s all about the niche

The next time you call your cable company to complain about paying $100 a month for hundreds of channels, get ready for them to agree. That’s because pay TV operators are starting to realize that not all customers are created equal, and that some might be much better served with content that has traditionally been ignored by TV networks.
Case in point: AT&T, (S ATT) which operates its own TV service as part of its Uverse offering, just agreed to jointly invest $500 million with the Chernin Group into a new venture that will acquire, invest in and launch online video services. Some of these services will be ad-supported, while others will be subscription-based.
AT&T and the Chernin Group didn’t offer additional details about the types of content they’re looking at, but a good indicator is that the Chernin Group contributed its newly-acquired majority stake in Crunchyroll to the new venture.

Same-day access to Japanese TV shows

Crunchyroll, which we have covered numerous times before on Gigaom, has become the premier service for Japanese anime content in the U.S., offering anime fans ad-supported episodes as well as a subscription tier that comes with same-day access. Crunchyroll subscribers can watch episodes of their favorite anime shows just hours after they air on Japanese television through a variety of apps for mobile and connected devices.
Crunchyroll recently branched out with the launch of KDrama, a new subscription offering for Korean dramas, and Crunchyroll founder Kun Gao has long said that he wants to expand into other content niches as well. “There is a huge demand for hyper-targeting users of other verticals,” he told me two years ago, when Crunchyroll announced 100,000 paying subscribers for its service.
Crunchyroll, and competitors like Viki and DramaFever, have also highlighted another advantage of the niche: Content is oftentimes much cheaper than the TV shows Netflix and Amazon are competing for, while still highly valuable to certain audiences. Crunchyroll and its competitors license Anime and Korean dramas only for use outside of their home markets, giving broadcasters in Japan and Korea another way to monetize their content.
The same could be done with domestic content that hasn’t gotten enough traction on cable, like college sports events other than basketball, other other niche sports like fly fishing, dressage or even competitive cycling. Other audiences could include Spanish-speaking viewers or other minorities underserved by traditional broadcast programming.

Competing with Comcast, billing through mobile

For AT&T, there is another upside in going for the niche: The phone company’s Uverse network still isn’t available in all markets, and it often competes heads-on with TV and triple-play offerings from Comcast and other cable companies. With niche video services, it could reach every consumer, regardless of their broadband provider, and even use its wireless service for marketing and payment services.
The idea that TV operators would one day move beyond their physical footprint and compete directly with streaming services has long been framed in the terms of virtual cable operators that would offer consumers complete bundles of everything from ABC (S DIS) to HBO, something that Intel Media tried with its OnCue service.
But increasingly, it looks like operators may be looking to the niche to make their first moves. Aside from AT&T, DirecTV has also started to investigate niche online programming, and there have been persistent rumors that Comcast is looking to launch niche online offerings as well.
In other words: The future of pay TV could be about paying for TV you actually want to watch.