Deeper Dive—AT&T hints at what the future holds for DirecTV

DirecTV clouds
DirecTV may be losing subscribers at a much faster rate than its peers but the service still helped deliver nearly $7 billion in video revenues during the second quarter, a significant piece of AT&T’s nearly $41 billion in total operating revenues. (Acabashi/Wikimedia Commons)

In a world where all traditional pay TV providers are losing subscribers, DirecTV still stands out. After another quarter of major losses, AT&T dropped some hints about the fate of its suffering satellite business.

During AT&T’s second-quarter earnings call this week, CEO John Stankey pointed toward his company’s primary software-based video products, HBO Max and AT&T TV, as the “optimal way to meet customer needs” for both live, linear and on-demand content.

“Do I think satellite is necessary to respond in that area? You can go back and look at comments I made very early on, post-transaction of DirecTV, that we didn’t necessarily make that move because we love satellite as a technology to deliver premium entertainment-based video content. We like the customer base and it was an opportunity to move that customer base into the right technology platforms moving forward and that’s clearly where we’re investing,” Stankey said.

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He said AT&T’s software-based services provide distribution flexibility and help establish direct relationships with the customer, which in turn results in data and analytics that can be used to hopefully bridge off other services.

“I don’t necessarily view satellite technology as a place necessary to make that happen,” Stankey said.

During the second quarter, AT&T again came under pressure from investors to sell DirecTV. Fox Business’ Charlie Gasparino cited bankers who predicted AT&T will need to sell off DirecTV soon to help alleviate concerns over high debt loads and the sagging satellite TV industry. He said it’s doubtful that AT&T will get what it paid for DirecTV, which was acquired in 2015 for $49 billion, and that bankers believe the company will have to settle for something like the spinoff agreement with Dish Network that was proposed last year.

That came before AT&T posted another net loss of 886,000 premium TV subscribers, bringing its total down to 17.69 million at the end of the second quarter.

Shortly after AT&T’s earnings call on Thursday, Stankey was asked by CNBC’s David Faber if his comments during the call meant that AT&T was considering jettisoning DirecTV. He declined to speculate on a divestiture but said that when AT&T bought DirecTV, it did so with the vision of offering advanced advertising within its customer base and providing an entertainment experience that customers could take anywhere and engage with on their terms.

“HBO Max and what we've done with AT&T TV gives us some very capable platforms to ensure we can continue to evolve the product in that way. And to the extent that we're able to get those customers engaged with us on those platforms, then you know, we're in a good place and we're okay with that. And if that takes us down a path that says satellite delivery is less important, so be it,” Stankey told CNBC. “I view the customers of DirecTV oftentimes as not necessarily attached to the asset per se.”

DirecTV may be losing subscribers at a much faster rate than its peers but the service still helped deliver nearly $7 billion in video revenues during the second quarter, a significant piece of AT&T’s nearly $41 billion in total operating revenues. However, AT&T TV is starting to gain some traction and the company said that helped to offset premium video losses. The company also said that AT&T TV has a 90% attach rate with its broadband services.

With the software shift beginning to gain momentum at AT&T, it’s likely Stankey and the rest of the company will continue to become more open about DirecTV’s future.

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