• by P.J. Bednarski , Staff Writer @pjbtweet, May 19, 2014

The media world is just now digesting AT&T’s proposed $49 billion acquisition of DirecTV but people in the online video business may be much more interested in how Peter Chernin fits in the picture.

The Chernin Group, led by Peter Chernin, the ex-News Corp. president and COO, joined with AT&T less than a month ago to announce a deal in which both companies committed over $500 million to invest and launch over-the-top,or OTT, video services, with “each bringing significant and complementary strengths.”  The announced goal of that partnership is “to invest in advertising and subscription VOD channels as well as streaming services.”

I would suppose that by April 22, when that deal was announced, AT&T and DirecTV were pretty far along in their much larger merger that was announced Sunday night. But the Chernin arrangement deal has more than a little to with the other, no doubt.

It seems rather obvious that a combination of  Chernin, DirecTV and AT&T will result in a  major OTT initiative, just as soon as regulators inevitably conclude that further consolidation of the media business is not only great for the country but will save money for consumers to boot. 

The merger gives a combined AT&T 26 million pay TV subscribers, second only to Comcast, and new markets to add to its U-verse broadband service. And how nice that AT&T can have that backbone as television content tilts more and more toward online video platforms.

If AT&T and Chernin want to get in the OTT business in a big way, this merger represents about as big a way as possible.

Reportedly,  AT&T, in one of those olive branches offered to regulators, said it would create new infrastructure to expand the availability of broadband service to 15 million households in rural communities, and offer a broadband-only content package, which, me thinks, is where the Chernin Group’s joint investment with AT&T  could take off.

Exactly what will happen, and when, is ridiculously hard to predict, since a lot could happen with other competitors in the time it takes for this merger to be finalized.  But as online video takes off, it’s more than a little significant that some very large companies are making very large plans to create the next Internet colossus around the idea of video content, which, at this moment, is really just peanut-sized.

What do they know that everybody else doesn’t yet seem to really believe?     

How this fits in with The Chernin Group’s other online investments bears watching, too. Last year, it led a $30 million round in YouTube multichannel network Fullscreen, which operates something like 10,000 YouTube channels and has designs on becoming a more major producer of content someday. (How an entity with 10,000 channels isn’t already a major producer depends on your definition of “producer,” I think).  

In the incestuous way the media business works, Comcast also invested in Fullscreen, and until Time Warner decided against it last week or so, it was interested in acquiring Fullscreen. Dizzying-as-normal.    

But clearly, as The Wall Street Journal reported late last night, referring to the AT&T-DirecTV deal and the Comcast-Time Warner one noted: “The deals show how the biggest companies in television and telecommunications are bulking up to face a changing media landscape. Growth is slowing in some markets, like pay TV and wireless subscriptions, and is exploding in others, like streaming video.” We'll see how it unfolds.

pj@mediapost.com