Comcast (NASDAQ: CMCSA) has maintained a successful facilities-based pay-TV business and has only begun dabbling in OTT video services. But BTIG analyst Rich Greenfield says AT&T's (NYSE: T) plans to offer DirecTV Now nationwide and without a satellite means Comcast will likely have to respond with a nationally available virtual MVPD of its own.
Greenfield said it's doubtful that Comcast would be willing to allow DirecTV to become the market leader for consumers seeking traditional pay-TV bundles on third-party set-tops like Roku and Apple TV (NASDAQ: AAPL).
"Does Comcast really want to be in the position where to get the full Xfinity experience, you have to call up Comcast, schedule an appointment and wait for someone to come to your home with Comcast-owned boxes that are expensive to rent versus being able to buy a cheap third-party set-top box at retail, or simply sign up on your existing mobile device, and instantly turn on service from DirecTV," Greenfield asked in an analyst note.
But he warns that, in order to respond to DirecTV's plans, Comcast would essentially have to step on the toes of its cable competitors that don't largely overlap with each other's service footprints.
Greenfield also predicts that a nationwide OTT response from Comcast would have the added effect of increasing virtual MVPD competition and lowering costs for consumers by eliminating set-top rental costs and reducing installation and service costs. He says a more robust streaming TV market could limit distributor leverage in retransmission negotiations as consumers will be able to much more easily replace channels or networks that go dark.
TDG Research analyst Alan Wolk agrees that AT&T's new DirecTV streaming services will be in heated competition with Dish Network's (NASDAQ: DISH) Sling TV, Verizon's (NYSE: VZ) Go90 and likely Comcast's Stream TV. But Wolk says the current wave of virtual MVPDs will continue to find a limited audience, only appealing to consumers who want occasional access to TV. Once the add-ons like regional sports, kids programming and premium channels enter the equation, it becomes cost-prohibitive as compared to traditional pay-TV service.
AT&T this week announced DirecTV Now, which will include "much of what is available" on the core DirecTV satellite service today, as well as DirecTV Mobile, a lower-priced tier aimed at smartphones, and DirecTV Preview, a free ad-supported video portal with limited available content.
The new DirecTV IP-only service tiers are expected to launch in the fourth quarter but AT&T has yet to announce pricing for the new options.
For more:
- read this BTIG blog post
- read this TDG Research analyst note
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