Network operators have established relationships with customers, while application developers and content providers have the products that customers are looking for. Combine them, and the result is new customers for the application and content providers and new revenue streams for the network operators.

Recently, Killer App’s assistant editor, Geoff Daily, spoke with Ken Tysell, Executive Director of Three Screen Services for AT&T, about his company’s relationships with application and content providers.

 
GD: Tell us about your role with AT&T.

KT: In my previous job, I was the product manager handling Homezone, responsible for feature definition and implementation. As you know, Homezone is a hybrid satellite/broadband media offering where we partner with companies including Echostar, 2Wire, Yahoo!, Movielink and Akimbo. Our role was to define the features associated with the product and work within AT&T to implement it and take the product to market.

My new role with the three-screen intiative is more of an upfront product planning role, as we look at all the different screens that AT&T touches: our U-Verse [IPTV] product, our wireless product and our PC portals, such as the AT&T Yahoo! portal. We’re looking at identifying the right mix of content and features that will play well across all of them and provide access to the same or similar content across all screens, so you can pay for content once and get access across multiple devices.

GD: Can you give us an overview of the partnerships AT&T has announced?

KT: For Homezone, we have partnerships with companies like Movielink and Akimbo to provide video-on-demand content, but we also have a relationship with Movielink to provide their aggregated movie content to a PC portal, which would be hosted by Movielink and branded as AT&T Yahoo! Movielink. Movielink is an example of a company we’re working with across multiple screens already.

Akimbo is another VoD partner we’re working with on Homezone, and we’re looking at ways to extend that content, which tends to be more niche-oriented, beyond the TV screen. Let’s take an existing relationship with a partner and find ways we can build and extend our relationship from one screen to another in a way that makes sense.

In the PC space, we’ve announced deals with Vongo and TotalVid to provide their content online through cobranded sites. When you start looking across the whole ecosystem, there are lots of screens where we’re doing different sorts of deals.
 

GD: Why has AT&T decided to partner with these companies rather than develop everything in house?

“We know where our core competencies are… We also know there are a lot of other really great providers out there.”

KT: These are very good quality companies with talented people working at them. These companies are very good at innovating quickly, and their time to market [is faster] because they have already established content rights and platforms that we can incorporate into AT&T’s offerings.

At each step of the process, there are opportunities for partners to work together. We know where our core competencies are in terms of network operations, service definition, marketing and the brand that we have. But we also know there are a lot of other really great providers out there that can complement what we do. And when we put them together we have a much better offering for consumers.

GD: How do these relationships affect AT&T’s ability to continue growing its suite of services and, ultimately, its revenue?

KT: With the three-screen effort, we’re moving into a new space – not just new for AT&T but for equipment providers, content providers and other entities across the whole media industry. There’s a lot of learning going on, a lot of experimenting with different features and types of content to try and find what will work.

Working with these companies lets us try out a lot of different things, so we can see what works and what needs a little more tweaking and refinement.
 

GD: What qualities make a potential application or content partner attractive to AT&T?

KT: One is having a unique and valuable asset, such as access to a certain type of content or a certain application we think customers will want. Another is having the ability to be innovative and put these new content features into the market quickly.
 

GD: How do these conversations typically get started?

KT: Sometimes it’s us contacting them. Sometimes it’s them contacting us. Sometimes other companies we’re working with have already heard of this company or that company and they’ve had their own discussions. Sometimes we bump into these companies at shows like CES. Sometimes we’ll read about them. Sometimes they’ll read about us. There’s no one formal way.
 

GD: Are there any types of applications you are particularly interested in, in addition to those you’ve already announced?

KT: Lots of different areas. When you look at the three-screen ecosystem, you’re looking at the value chain from start to finish. The types of companies we’re interested in can range from platform providers – those that help make things like the ingestion of content work – to those providing front-end designs or user interfaces. And we’re working with companies that have created content, acquired rights for it, or are hosting and distributing content.
 

KT: We’ve done a lot of market research to find out what customers want both now and down the road. That includes qualitative market research like focus groups, where you’re bringing six to twelve people into a room, giving them a brief demo, and asking if they’re interested in it, as well as quantitative research – formal, structured surveys of a much larger base. We also do a lot of human-factors testing to find out how customers will interact with a piece of content or application. Once we’ve identified a gap between what people want and what we offer, we identify partners to work with to fill this demand.
 

GD: What has this research shown?

KT: Customers say they want deeper libraries of easy-to-access video content. For example, in the Homezone service, we’ve got well over 1,000 titles available through Movielink and over 6,000 titles through Akimbo.

Customers say, “I don’t want to know how the clock works, just that it tells time.”

Another thing they’re looking for is ease of use and simplicity. Customers have said, “Hey, I don’t want to know how the clock works, just that it tells time.” So we offer professional installations of the Homezone service.

As we start finding ways to have our products interoperate, we’ve opened up features like remote access – basically, the ability to go to a Web page, access your TV program guide and set your DVR to record a program. A cool thing, but also a highly valuable thing for customers if they forget to record the baseball game. That’s another example of a feature that popped out of the research as being a high-value-add.

Obviously there’s been a lot of research into other types of media, like photos, games or videoconferencing. Part of the challenge is finding out the degree of integration and convergence that customers are looking for across different devices. For example, customers are starting to do more and more videoconferencing. The question is, do you integrate the videoconferencing to your TV, or keep it as a standalone device attached to the PC? Are they more likely to use it in a home-office setting or in a more social setting, in their living room?

In the music space, there are a lot big players like Apple and others. We’re tracking it very closely to see how that market evolves and whether there’s an opportunity for integration into any of these devices that we offer.

GD: What did you learn about making the Internet accessible through the TV set?

KT: One of our key findings was that whatever feature, application or piece of content we made available on a TV set – through our U-verse or Homezone products, for example – it had to be consumable in a social living-room environment via a TV screen with a “10 foot view.” This involves using a different sort of user interface and navigation scheme than you might find on a PC.
 

KT: In terms of simply porting a PC Web browser as we currently know it (like Internet Explorer) to the TV, customers told us they were not as likely to surf the Web using a TV screen in a living room as they were to surf using a PC screen with a two-foot view.

“Customers told us they were not likely to surf the Web using a TV screen in a living room.”

People just behave differently in different rooms of their house, and while browsing the Internet with a PC screen works great in a home office or at work, that same sort of web-surfing behavior just doesn't translate as well to a TV screen in a living room. Of course, if customers were to change their minds and tell us they did want to surf the Internet using their TVs, we'd be happy to look at that – but that's not what customers have told us so far. 

The example of WebTV is also instructive.  That product was very interesting, but ultimately failed, since customers didn't want to surf the Internet using their TV screen.

GD: How is partnering with AT&T beneficial to an application developer?

KT: We offer a pretty well-known and trusted brand name. We also bring a fair amount of marketing and sales clout to anything we offer. Once we take a feature or application and integrate it into Homezone or U-Verse or a PC portal or even our phones, we can do a really solid job of marketing and messaging the availability of that service. We bring peace of mind to our partners and customers with our brand and abilities.
 

GD: What types of business models have you established with partners?

KT: One quick-to market option is to work with a partner and basically white-label their service. The provider’s content or functionality is integrated with the AT&T platform in such a way that the end user thinks they’re getting an AT&T product. In other types of arrangements, we do cobranding. The end user sees the partner’s brand and has a greater awareness that it’s not just coming from AT&T, but also being arranged by the partner. The economics behind it may involve a revenue share or any other type of financial arrangement you can imagine. All of these deals have slightly different business models. We’re pretty open to exploring any and all business models that work for both companies.
 

[Editor’s Note: AT&T’s relationship with Yahoo!, to which Tysell refers in this interview, made headlines recently when the Wall Street Journal reported rumors that the partnership was on the ropes. In response, the two companies issued a joint press release saying that they expected to expand the partnership into the mobile arena as well as into AT&T's IPTV offering, and also planned to add advertising to their cobranded mail service.]