DirecTV Now’s 152K subscriber gains in Q2 can’t offset 351K lost by U-verse and satellite

All told, AT&T lost 199,000 pay-TV users in the second quarter.

AT&T endured heavy losses across its U-verse and DirecTV satellite pay TV platforms, big enough so that impressive gains made by the company’s virtual MPVD product couldn’t offset the chasm. 

All told, AT&T lost 199,000 pay-TV users in the second quarter. The rapidly eroding U-verse platform lost 195,000 customers, while the DirecTV satellite service shed 156,000; total losses of 351,000 rendered AT&T’s linear pay-TV base flat with the year-ago period at 25.2 million customers. 

Evercore analyst Vijay Jayant predicted that AT&T would tally losses of 300,000 across its two linear pay-TV platforms in the quarter. Deutsche Bank, meanwhile, forecasted linear TV losses of between 240,000 - 268,000.

AT&T said that half of DirecTV Now’s growth of 152,000 users in the second quarter came from customers fleeing traditional pay-TV, “mainly from our competitors.” AT&T said the platform has grown to 500,000 subscribers in just under seven months since launch. 

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“That’s pretty dramatic growth,” said AT&T CFO John Stephens, “especially when you consider there were a couple of months of rest there when we put the platform through performance testing.”

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Indeed, AT&T slowed down on promotion of DirecTV Now in the first quarter, with the company’s engineering team attempting to work out technical issues. AT&T announced on Monday that it’s about to launch the platform's first big national ad campaign.  

MoffettNathanson analyst Craig Moffett noted that while DirecTV Now's $35-a-month price entry-level point might reduce churn on the wireless side of AT&T's business, it's not churning up much profit. 

"By our estimate, DirecTV Now's $35 Live-a-Little package carries roughly $30 in programming costs. Selling $10-per-month subscriptions may help results in the wireless segment(s), but it won't help in Entertainment. Nor will selling HBO for $5 per month help Time Warner."

On the wireline side of AT&T's business, the company reported gains of 112,000 IP broadband users for the second quarter and losses of 108,000 DSL customers, all for a net gain of 8,000 high-speed internet subscribers.