AT&T CEO Randall Stephenson said DirecTV’s rapid subscriber base decline will continue this year as his company lets lower revenue customers leave the service as their contracts expire.
“This is going to be a year of cleaning up the video business,” said Stephenson today during a JP Morgan investor conference.
Aside from sustainable content agreements, Stephenson said getting low ARPU customers off of DirecTV is key to stabilizing AT&T’s video business. He warned that it will churn rates to spike but said that AT&T doesn’t see a way to get them to profitable levels. He added that DirecTV’s churn is over 100% driven by this customer base.
During the most recent quarter, AT&T reported a net loss of 544,000 traditional video subscribers and a net loss of 83,000 DirecTV Now subscribers. The company’s total 627,000 video subscriber losses accounted for approximately half of 1.28 million subscribers lost by the U.S. pay TV industry in the first quarter, according to the Leichtman Research Group.
The good news is that AT&T’s video business should achieve EBITDA stability this year and into 2020, according to Stephenson. He said going forward, DirecTV’s “thin client,” a streaming version of DirecTV that’s debuting later this year, will be the workhorse for DirecTV, and will bring price levels down for customers that are struggling.
AT&T is also working on its WarnerMedia subscription streaming service, which Stephenson said will beta-launch this year before getting a full launch in 2020. He said his company sees tens of millions of subscribers showing up for the service, and he clarified that people who subscribe to HBO on other pay TV platforms like Comcast will get access to the service.