Pulling the Band-Aid off a few weeks ahead of its next quarterly earnings report, AT&T revealed in an 8-K filing to the Securities and Exchange Commission that it lost around 390,000 linear pay-TV subscribers across its DirecTV and U-verse platforms in the third quarter.
The pain is somewhat offset by the addition of 300,000 new customers for the operator’s virtual DirecTV Now platform.
“The video net losses were driven by heightened competition in traditional pay TV markets and over-the-top services, hurricanes and our stricter credit standards,” AT&T said in its filing.
Coming off a record-bad period for pay-TV attrition in the first six months of 2017, and with Comcast declaring a month ago that the combination of cord cutting and storms would lead it to lose as many as 150,000 pay-TV customers in the third quarter, analysts are ringing alarm bells.
“No one should have expected AT&T’s video subscriber results to be good in Q3. But we doubt anyone expected them to be this bad,” said MoffettNathanson analyst Craig Moffett.
In a late-day note to investors Wednesday, Moffett said the filing reveals four things:
First, that cord cutting is now officially a thing—a dynamic that seemed to set in when the industry lost 976,000 customers in the second quarter.
Two, the 8-K debunked speculation that Comcast’s subscriber losses are being driven by aggressive promotions across wireless and wireline divisions at AT&T to drive DirecTV sign-ups. “DirecTV and Comcast are responding to the same secular pressures,” Moffett wrote.
Third, the analyst said that “it is becoming increasingly clear that the wheels are falling off of satellite TV.” Moffett expects Dish Network to continue to post awful subscriber numbers in the third quarter.
Oh, and for the fourth item, he said there’s absolutely no way AT&T will buy Dish now.
As for the DirecTV Now additions, the virtual MVPD ended the second quarter with around 500,000 customers, according to AT&T. The telecom views the service as an important bundling component and a complement to its core wireless business. But DirecTV Now’s low margins have failed to spark the imaginations of analysts like Moffett.