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AT&T to launch DirecTV Now streaming service before year's end

by on23 September 2016

Lower pricing brings questions for 4.85 million U-verse subscribers

On Wednesday, during an AT&T investor’s conference, the company announced plans to launch an Internet-based video streaming app of its DirecTV programming lineup to serve alongside its existing satellite service and U-verse IPTV options.

The new app is called DirecTV Now, an over-the-top streaming service that will offer up to 100 premium channels to begin with, including Disney and HBO. Meanwhile, AT&T says more content deals are currently underway and are about “90 percent there” with a few remaining holdouts.

Lower deployment costs without installation fees

AT&T CEO Randall Stephenson has said the service will launch before the end of the year and says the company plans to subscribe an initial 20 million households that do not currently subscribe to pay-TV service. The advantage of rolling out an IP-based video service, he says, is the lower deployment costs associated with providing it to customers. Although U-verse is already an IPTV service, the idea with DirecTV Now is that the company will not need to pay employees to visit residencies or businesses to install cables or local device equipment – customers can simply download the DirecTV Now app to their TVs, PCs, consoles and mobile devices.

directv streaming app

DirecTV's current streaming app for mobile devices and Amazon Kindle

The company’s IP service enters into the market alongside Sling TV and Sony’s PlayStation Vue, SFN’s TV Now, and soon Hulu’s live TV service. On the low end, prices start at $20 per month for just a handful of channels and will go up from there, depending on the selected package and service provider. There is often a catch, however, as services like PlayStation Vue are locked down to a single IP address and cannot be streamed to other household or mobile devices.

In contrast, AT&T claims it will provide one to two DirecTV Now streams per household, and will offer the ability to purchase more simultaneous streams per subscription.

Stephenson acknowledged that the new IP streaming service has the potential to disrupt sales from its premium DirecTV satellite and U-verse IPTV offerings, but says this is a good sign because “it means you have found something the market really wants.”

Of course, with a more limited initial rollout of 100 channels, many customers may still prefer to weigh their options or simply wait for the company to offer more distinctive advantages, benefits or service bundles over having traditional DirecTV or U-verse service.

Set-top box subscriptions not being replaced anytime soon

AT&T acquired DirecTV last year for $49 billion (to the dismay of consumer advocacy groups) during a time when consumers have been cutting pay-TV subscriptions in favor of over-the-top services like Hulu, Netflix, Vudu and others. As many have noticed, however, there is a large market gap in the channel offerings between over-the-top services and traditional cable, satellite and IPTV telecom packages that attract some customers to lower prices, but prevent others from abandoning a larger selection of service.

A report from summer 2015 indicates that cable, satellite and telecom TV subscription companies witnessed their largest quarterly subscriber decline at nearly 566,000 accounts between April and June last year. Of these, DirecTV disclosed that it lost 133,000 subscribers during the period, while AT&T’s U-verse lost 22,000. Fast forward one year later in Q2 2016, and DirecTV reports that it added 342,000 subscribers while U-verse decreased by 49,000 subscribers, respectively.

Fluctuating subscriptions signal market interest in streaming options

It was a slightly different story in Q4 2015, however, when AT&T’s DirecTV unit added 214,000 subscribers while the company’s own U-verse service dropped 240,000 subscriptions during the same period. This was the first full quarter that revenue from both units was included in results, with DirecTV ending up with 25.4 million total customers and U-Verse ending with 5.61 million at the end of 2015, respectively. As of its Q2 2016 earnings report, the company now has 20.4 million customers on DirecTV and 4.85 million on U-verse.

While some claim that traditional set-top box subscriptions are slowly dropping in favor of over-the-top solutions, it is more likely that cable and satellite customers will continue benefit from having a larger selection of channels while IP-based app solutions like AT&T’s DirecTV Now begin to roll out over the course of the next few years.

Last year, Cablevision Systems CEO James Dolan was asked about the state of cable subscriber numbers during an earnings call, to which he responded, “I don’t think the sky is falling quite yet, and I think that there is not enough programming weight yet in the Internet and in the over-the-top services that are out there to really entice a mainstream video customer.” He went on to say that he expects it to be at least another five years for 10 percent of the market to move, and about ten years for 30 percent to move.

Last modified on 23 September 2016
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