“DirecTV Now joins online services aiming to replace cable,” reads an Associated Press headline.
“AT&T's DirecTV Now service provides a reason to cut cable TV,” noted IDG blog TechHive.
“Cable TV finally has real competition delivered over the internet,” added Recode deep thinker Peter Kafka.
Finally raising the curtain on its virtual pay-TV service on Monday, AT&T revealed an OTT product that is pretty much what it says it is—a niche streaming service aimed at cord-cutters and folks with “circumstances,” such as bad credit or the inability to point a satellite dish at the southern sky.
At least in its current “iteration”—the term favored by AT&T execs—DirecTV Now isn’t going to replace right-priced traditional video services from cable, satellite or telco providers any time soon.
“We believe there are meaningful limitations at present that prevent the DirecTV product from being comparable to regular bundles,” said Barclays analyst Kannan Venkateshwar, in a note to investors this morning.
The limitations start with the pricing. Initially, AT&T is offering its 100-plus-channel “Go Big” tier at only $35 per month. Take away that promotion, however, and consumers are paying $60 per month to get a bundle comparable to base-level traditional pay-TV services, many of which are competitively priced.
Sans promotion, DirecTV Now does offer a $35-per-month package, but that will only get you around 60 channels, and it won’t deliver much in the way of live sports.
Broadcast reach, meanwhile, is limited, no matter which of the four tiers, which range in price from $35 to $70 per month.
AT&T wasn’t able to get CBS Corp. on board, so it will launch with only three of the Big Four networks. Until AT&T can carve deals with the myriad operators of FOX, NBC and ABC affiliate stations, broadcast reach will be confined to markets in which network owned-and-operated stations exist.
Beyond content and price, subscribing households can only draw two streams at once from the service. “We do note that on average, U.S homes have about 2.5 set top boxes, which implies that a two-stream product may satisfy the needs of a meaningful portion of the market,” Venkateshwar noted.
As of now, there is no cloud DVR. And we haven’t even gotten to the point where we can evaluate how well the technology works. I can tell you that as a Sling TV subscriber, the $20-per-month price point appeals to me. But as watched the spinning buffering wheel during Adoree Jackson’s third touchdown run Saturday for USC vs. Notre Dame, cancelling my Spectrum TV bill didn’t come to mind.
Hopefully, DirecTV Now will be lightyears better, technology-wise, than Dish Network’s troubled Sling TV. But even if it is, the streaming will have to be amazingly good to match the reliability of fixed viewing of pay-TV services in my living room.
Does DirecTV Now pose any risk to traditional pay-TV? It probably does, in certain markets. But as Venkateshwar added, the risk is, well, limited.
“Overall, in light of the above, we believe the risk from a product like DTV Now is likely to be felt more in large DMAs like New York, where the product is more 'complete' with broadcast,” he said. “This risk could show up in the form of higher churn at cable companies, especially if the $35/month promotional price for 100+ channels is retained for a while.” -Daniel, @FierceCable