AT&T ex­pects to lose nearly 400,000 pay-TV sub­scribers this quar­ter

Texarkana Gazette - - MARKET REPORT -

DAL­LAS—As more cus­tomers cut their ca­ble and turn to stream­ing ser­vices, AT&T says it ex­pects to lose about 390,000 tra­di­tional pay-TV sub­scribers this quar­ter, ac­cord­ing to fi­nan­cial doc­u­ments filed with the Se­cu­ri­ties and Ex­change Com­mis­sion. That would mark an ac­cel­er­ated de­cline from the sec­ond quar­ter, when AT&T lost 351,000 pay-TV sub­scribers.

In the fil­ing, how­ever, the Dal­las­based tele­com com­pany pointed to a sil­ver lin­ing. It said it’s stemmed losses with its own ca­ble al­ter­na­tive: on­line stream­ing ser­vice DirecTV Now. AT&T an­tic­i­pates that DirecTV Now will gain nearly 300,000 new cus­tomers dur­ing the third quar­ter, which would cut the com­pany’s video net losses to 90,000.

AT&T at­trib­uted the de­cline in video sub­scrip­tions to in­creased com­pe­ti­tion from both tra­di­tional pay-TV providers and stream­ing ser­vices, hur­ri­canes, and its stricter credit stan­dards, ac­cord­ing to the SEC fil­ing.

The de­cline of ca­ble has hit all pay-TV com­pa­nies. AT&T be­came the largest pay-TV provider in the coun­try when it ac­quired DirecTV in 2015. It has two pay-TV ser­vices: DirecTV and U-Verse.

Last fall, it de­buted its first on­line stream­ing ser­vice, DirecTV Now. AT&T’s en­ter­tain­ment chief, John Stankey, de­scribes the ser­vice as a way to ap­peal to cus­tomers who don’t want a ca­ble bill, such as apart­ment dwellers, 20- and 30-some­things, and price-con­scious house­holds. DirecTV Now does not re­quire a con­tract. In­stead, it has a monthly sub­scrip­tion fee sim­i­lar to Net­flix but with a more ca­ble-like chan­nel lineup.

As of late July, AT&T said DirecTV Now had at­tracted nearly half a mil­lion sub­scribers. Prices start at $35 per month.

Roger Ent­ner, founder and lead an­a­lyst of Re­con An­a­lyt­ics, said DirecTV Now may have thin­ner mar­gins than ca­ble or satel­lite, but it costs AT&T less and taps into a new cus­tomer base. There are fewer up­front costs for the com­pany, such as putting a dish on the roof. And the ser­vice may ul­ti­mately in­spire cus­tomers to tack on other AT&T prod­ucts, he said. “If we look 10 years from now, DirecTV Now is the fu­ture,” he said. “You can get out of the hard­ware busi­ness. The ser­vice be­comes per­fectly mov­able with the con­sumer. It doesn’t mat­ter if they want to watch their con­tent on a big screen TV or a tablet or a phone. It just walks with them.” He said the re­cent drop in AT&T video sub­scribers un­der­scores the frag­men­ta­tion of the en­ter­tain­ment land­scape. In­stead of turn­ing to a sin­gle com­pany for ca­ble, cus­tomers often sign up for mul­ti­ple on­line video ser­vices like Hulu, Ama­zon and Net­flix. But, he said, that doesn’t mean they’re al­ways pay­ing less.

“They are get­ting 10 bills that are smaller but are spend­ing more,” he said. “Your sticker shock goes away but you get nickel-and-dimed to death.”

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