AT&T TV is being positioned as the company’s shiny new alternative to its freefalling DirecTV business, but it will clearly need more time to shore up the losses.
AT&T dropped another nearly 900,000 premium video subscribers – a group that encompasses DirecTV, U-verse and AT&T TV, which launched late in the first quarter. Paired with the AT&T TV Now subscriber exodus, AT&T’s video subscriber losses topped one million again. At some point, the hope is that AT&T TV will begin to offset those losses, but it may still be too early.
AT&T didn’t break out any subscriber numbers for AT&T TV when it announced earnings this week. COO John Stankey did say early results for AT&T TV were encouraging but warned that the product is still in its infancy.
“Our expectations on AT&T TV have been very consistent with what we have seen even with the suppression of the pandemic in the latter part of March where we were restricted on the certain number of dispatches and some of our capacity there,” said Stankey, according to a Seeking Alpha transcript. “So, we feel pretty good about that launch and where we went. As you know, we have to ramp that throughout the year, so one month does not a year make, but we are right on the plan of what we expected in terms of volume and the customer feedback on the customers we have put on the product has been probably stronger than what we expected.”
AT&T TV does seem like an improvement over the company’s legacy video distribution products. It’s a flexible platform with important features including voice, third-party app integrations, unified search and cloud DVR. It also has two-year contracts with significant monthly price increases in year two, something that drove many consumers away from pay TV in the first place.
The ongoing coronavirus pandemic is likely another factor that may be hamstringing AT&T TV in its early days.
“Recall that in Q1 the company largely stopped marketing the DirecTV brand in favor of their new dish-less AT&T TV service. To state the obvious, this wasn’t the ideal backdrop for having to do such a thing,” wrote analyst Craig Moffett in a research note.
While AT&T TV attempts to scale in a hostile economic environment, AT&T’s video subscriber losses remain sky-high, something Moffett said leaves the company with no choice but to keep raising prices, reducing promotions and slashing costs including customer acquisition.
“…All of which only makes the cord-cutting problem worse going forward. And now, without sports on the air, the value proposition for consumers is made all the weaker,” he wrote.
Surprisingly, Stankey said this week that coronavirus didn’t accelerate video subscriber losses in the first quarter and that “if anything, it’s slowed a little bit as people are engaging more with the product.” However, he’s bracing for impact later this year.
“One would conclude in a stressed economic environment there are probably going to be adjustments people make within their lifestyles and their homes. I would expect that we would see more pressure on [video subscriber losses] as we move through the year,” Stankey said.
In that case, it’s hard to imagine many people would drop DirecTV and pick up the similarly priced AT&T TV. However, AT&T TV doesn’t rely on a satellite dish – something that provides it with a larger addressable market – and it’s a product that many consumers can install on their own. Those factors could help it grow and begin to staunch DirecTV’s bleeding even in a pandemic-induced economic downturn. It’s just going to take some time.