After spending the last couple of weeks closing the deal to buy TimeWarner for $85 billion and buying ad firm AppNexus for up to $2 billion, today AT&T announced a key distribution move in its new bid to be a media powerhouse: it’s taking a strategic investment into Magic Leap, the high profile augmented reality startup, which will include becoming the exclusive “wireless distributor” of Magic Leap products in the U.S. starting this summer.
“When available for consumers, AT&T customers will be among the first to experience it in select AT&T stores in Atlanta, Boston, Chicago, Los Angeles, and San Francisco, with more markets to follow,” AT&T said today.
The two companies have not revealed the financial terms of the stake. But Magic Leap last raised in a round in March of led by Sinapore’s Temasek that valued the startup at $6.3 billion, and the companies have confirmed that this completes the Series D round. The value of that round was ultimately $963 million, says PitchBook.
The two have also laid out some of the strategic terms. In addition to exclusive distribution when the first device, the Magic Leap One, Creator Edition, the investment gives AT&T exclusive rights to work with Magic Leap across a range of areas covering network access, content distribution and devices.
“AT&T is excited to pair our pioneering technologies, unmatched network, content platform, and vast customer ecosystem with Magic Leap’s efforts to build the next generation of computing,” said AT&T Communications CEO John Donovan, in a statement. “We’re designing and offering the future of entertainment and connectivity, and this exclusive arrangement – in combination with our 5G leadership position – will open up new opportunities and experiences.” Donovan becomes a board observer with this investment.
Magic Leap has raised more than $2 billion to develop its hardware and software, but it has yet to launch a product. However, that could be about to change. Magic Leap today streamed a demo and specs of the Magic Leap One, Creator Edition, the first commercial fruit of its labor, today at 11am Eastern time.
“We’ve joined with AT&T because we believe in a combined vision of expanding high-speed networks, edge computing, and deep integration with creative content,” said Rony Abovitz, Founder, President and CEO of Magic Leap, in a statement. “Coupling the strength of the evolving AT&T network with Magic Leap’s spatial computing platform can transform computing experiences for people.”
The partnership looks like it is set to coincide with the launch of Magic Leap’s first product, the Magic Leap One, which the company describes as a “lightweight, wearable computer that will enrich real world experience with digital content.” The Creator edition, a limited edition designed for developers and designers, is scheduled to ship later this year.
Magic Leap has raised $2.35 billion to date, and in that mix it has taken a number of strategic backers including Google, Alibaba and Axel Springer. With all of them wanting a piece of the action — assuming it will be a winner — AT&T is providing something specific in the mix.
Carriers play a key role in helping get portable devices into the hands of consumers. When the device is a hit — for example, as was the case with AT&T and the first generations of the iPhone, which it carried exclusively — the deal can be a huge win for both companies, as a partnership not only provides the carrier with a draw for new customers, but for the device maker, it’s able to offer its devices bundled with mobile subscriptions to actually use them. For both sides, reducing friction for consumers is tantamount.
But AT&T is playing on a couple of levels here. It and all telecoms carriers really lost out on the smartphone boom when it come to value-added services on top of basic mobile data connectivity and selling subsidised devices. Handset makers, those who make mobile operating systems and app makers have held the keys when it came to services and “owning” customers — by which I mean owning their wallets and spend.
AT&T — along with other carriers like Verizon (which owns us) — has been trying to take a different approach with media more recently though. Tapping into the fact that many media companies have not been run as well as they could have been, carriers are using their healthy balance sheets to buy up content assets so that they can try to have another go at winning over customers and their services spend, to offset their stagnating network access businesses.