AT&T has officially gone nationwide with its new AT&T TV streaming service. That means DirecTV and U-verse are officially old news for the telecom giant.
To be clear, DirecTV and U-verse aren’t disappearing yet. At the Morgan Stanley investor conference this week, AT&T COO John Stankey said that his company will continue to sell DirecTV “where it has a rightful place in the market, places where cable broadband is not prevalent, oftentimes, more rural or less dense suburban areas.”
In the meantime, AT&T confirmed to Cord Cutters News that it will no longer be accepting online orders for U-verse TV. However, current U-verse customers will be able to continue using their TV service.
This usurping of AT&T’s two legacy TV distribution services by a shiny, new software-based video product is something that Stankey said his company has been telegraphing since it bought DirecTV back in 2015.
“I think, back in July of 2015, after we closed the DirecTV transaction, we're pretty clear and said that at that point in time that we didn't see satellite delivery as necessarily a growth vehicle for entertainment moving forward. We like the DirecTV customer base, thought it was attractive. But we felt like the march needed to be to delivering entertainment over software,” said Stankey. “And shortly after that period of time, we made it clear that we would be developing a software platform that would ultimately, not only take our satellite base and offer them a more updated product, but be the replacement for the U-verse space that was already in service and give them the next generation of software-driven TV.”
That software-driven vision originally manifested itself as DirecTV Now before it became AT&T TV Now, which steadily dropped subscribers throughout 2019. Now, AT&T TV is the future.
Emily Groch, Comperemedia’s director of insights for telecoms, predicted earlier this year that U-verse (for new subscribers) and AT&T TV Now would fade away as AT&T puts its marketing machine behind AT&T TV and HBO Max in markets where it offers broadband.
“According to Comperemedia and Pathmatics, before AT&T launched AT&T TV, nearly all the company’s Facebook ads for TV products featured DirecTV (less than 1% of its Facebook ad spend went to U-verse TV ads). The story has changed drastically in the AT&T TV pilot markets since the August launch; each month, spending on DirecTV ads has decreased as AT&T invested more heavily into promoting AT&T TV on Facebook. By the end of November, less than 30% of AT&T’s Facebook spend for TV products went to DirecTV in these pilot markets, while the vast majority featured AT&T TV,” Groch wrote.
The transition away from DirecTV and U-verse toward getting more subscribers onto AT&T TV will be a lengthy and complicated process, but it could help AT&T begin to right the ship in terms of video subscriber losses. The company lost approximately 4.1 million subscribers last year. However, the good news is that 2020 will still be bad, but not that bad. UBS analyst John Hodulik estimates AT&T’s video subscriber losses will total 2.8 million this year, equaling a rate of decline at around 14%.
Stankey said that AT&T’s video subscriber declines will be more consistent with what is going on in the pay TV industry in aggregate by the time the back half of 2020 rolls around.
With so much riding on AT&T TV, AT&T will put its all its muscle into marketing, developing and growing the product, leaving little left for DirecTV and U-verse. The two services can still hang on for years without much love from their parent company but eventually, they’ll likely go extinct.