AT&T Q3 earnings: DirecTV linear platform shrinks year over year for first time

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The linear losses are mitigated by the fast growth of the year-old DirecTV Now virtual platform.

Solidifying the notion that the linear DirecTV satellite TV platform is shrinking faster than AT&T thought it would when it bought the company for $49 billion, the service lost 251,000 customers in the third quarter. 

The loss compounds the continued and accepted erosion of AT&T’s legacy pay-TV platform, the IPTV-based U-verse, which lost another 134,000 video customers during the three-month period.

The linear losses are mitigated by the fast growth of the year-old DirecTV Now virtual platform, which gained around 296,000 subscribers during the period. DirecTV Now has around 800,000 users, AT&T said, with 700,000 of them coming from outside the DirecTV linear subscriber ranks. 

The DirecTV linear loss compared to a gain of 351,000 subscribers in the third quarter of 2016. Notably, DirecTV’s total subscriber base is 0.8% smaller than it was a year ago, marking the first time it has shrunk year over year. U-verse losses, meanwhile, actually improved from a gashing of 326,000 in the same period a year ago. 

MoffettNathanson analyst Craig Moffett noted that AT&T’s third-quarter report occurred a year to the day from when the company tendered its $85 billion offer for Time Warner Inc. A lot has changed in 365 days. 

“Since then, declines in the broader pay-TV distribution sector have accelerated from 1.4% per year to what we forecast will be ~3.4% this quarter,” Moffett said in a note to investors. “DirecTV is now losing subscribers, compounding rather than offsetting the decline at U-verse. DirecTV’s OTT service is one of no less than five competing vMVPD services, none of which is charging enough to make money.”

For its part, AT&T insists that a good portion of the third-quarter losses stemmed from the massive disruptions in Texas and Florida caused by hurricanes in August and September.