By Aaron Pressman
October 12, 2018

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“Sub-scale D2C efforts” isn’t a phrase you hear every day—doesn’t exactly roll off the tongue, does it? But the awkward phrase, used in a securities filing by AT&T this week, does accurately describe a lot about the future of TV and how we will be consuming entertainment more generally.

With Netflix as one of the obvious winners in the present and future landscape of video entertainment, rivals are getting ready to challenge the leader. Disney explained over the summer that it would base its coming subscription streaming service around its heavyweight brands like Star Wars and The Simpsons, which it’s acquiring in the Fox deal. AT&T this week outlined its coming service built around all of the content it got by buying Time Warner. Monthly prices are still TBD, but CNBC reported that Apple’s similar service will likely be offered free to consumers who buy the company’s hardware, at least initially. All of the upcoming services will follow the Netflix distribution model of letting viewers subscribe and watch directly over the Internet, without requiring a middleman like a cable or satellite TV service. Next year is going to be a bountiful, if confusing, time to be a TV lover.

The real challenge, of course, is that the day isn’t getting any longer and Americans have been watching seven to eight hours of TV a day, on average, for the past 40 years or so.

And that brings us back to AT&T’s “sub-scale D2C efforts.” In explaining to investors how it would finance its new mega-streaming service, AT&T cited improving efficiencies at newly-acquired Time Warner, including by possibly cutting back on some of the smaller streaming services Time Warner created. Those direct-to-consumer, or “D2C,” efforts have not attracted many viewers, leaving them “sub-scale” in size. AT&T didn’t name names, but Variety did, citing cartoon service Boomerang, Korean programming service DramaFever, and a DC comic book-inspired platform as facing possible elimination.

While some of the more ludicrous punditry predicts that viewers will spend just as much money on streaming services as they spent on old-fashioned cable TV (over $100 a month, last I checked), the more likely outcome is a winnowing. Even among the giants, some “D2C efforts” may wind up at “sub-scale.”

Aaron Pressman
@ampressman
aaron.pressman@fortune.com

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