AT&T will lose another 62K linear TV subs in Q1 as OTT continues to grow, Deutsche Bank predicts

DirecTV Now devices (DirecTV Now)
Screenshot: DirecTV Now

AT&T will report continued hemorrhaging of linear pay-TV customers in the first quarter, while also revealing sustained growth of its new OTT service, DirecTV Now, Deutsche Bank analyst Matthew Niknam predicted in a note to investors sent this morning. 

“Despite secular challenges facing the satellite video business, AT&T has been aggressively re-investing cash flow and DirecTV synergies into DirecTV Now, Niknam said.

The analyst predicted that pay-TV customer losses on AT&T’s legacy U-verse platform will continue to outstrip migration to the acquired DirecTV satellite platform, resulting in a  net loss of about 62,000 video customers in the first quarter.

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“We also expect continued volume growth in OTT, as DirecTV Now was in market for a full quarter,” he added. “Looking forward, we expect segment growth in the 3-4% range (via rate increases and DTV Now growth), though we think margins should remain relatively stable (as DTV synergies are re-invested in digital/mobile rights, and AT&T sees continued pressure on video gross margins/mix shift towards DTV Now).”

AT&T said that its DirecTV Now platform attracted 200,000 customers from its Nov. 30 launch through the last day of the fourth quarter, Dec. 31. 

The conglomerate reported a net loss of 27,000 linear pay-TV customers in Q4.