AT&T will launch ‘very low end’ $15-a-month ‘Watch’ service only if Time Warner deal closes, CFO says

AT&T / DirecTV Now
If AT&T closes on Time Warner, it will launch a new OTT product that will sit on the value chain below DirecTV Now. (AT&T)

AT&T will bookend its $35-a-month DirecTV Now vMVPD with a much skinnier, less expensive OTT product built around Time Warner programming—but only if the wireless company can close its $85.4 billion purchase of the media company, CFO John Stephens said.

So explained John Stephens, who extrapolated on the speculative $15-a-month AT&T Watch service at the Cowen and Company 46th Annual Technology, Media & Telecom Conference, two weeks after his boss, AT&T chief executive Randall Stephenson, first shed light on it at another media investor confab two weeks ago.

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“AT&T Watch would be a very low end, very thin collection of products, and I think this one will be based on getting the Time Warner deal done,” Stephens said (transcript provided by Seeking Alpha.)

Stephens said AT&T wants to take “some of the Turner video channels and bundle them with a small number of other channels and put a very small product for a customer base who is looking for that value and have a price point in the $15 range.”

The OTT product would sit on the value chain below DirecTV Now, which is base priced at $35 a month for more than 60 channels, tiering up to $70 a month for a bundle of more than 120 networks. AT&T is also reading the launch of a more premium OTT service, targeted to the fourth quarter, that will deliver full pay TV bundles of 200 channels or more.

“You can serve another customer segment—those full products effectively serve the whole customer spectrum, and we still have the opportunity to take the benefits of advertising, data insights and information that you can get from that activity,” Stephens said.

The CFO, meanwhile, continued AT&T’s messaging campaign on the eventual profitability of migrating the company’s linear pay TV user base to OTT.

“When you think about an additional stream or if you think about cloud DVR, or if you think about pay-per-view, or if you think about the data insights and how advertising and other revenue sources that may come from other than the customer, you can see where you can add significant amounts of revenue to the to the platform and get into what we would believe is to be acceptable margins,” he said.

This is true “particularly when you think about the fact that there's very little capex associated with acquiring one of those customers,” Stephens added.