Deeper Dive—AT&T TV falls short of ‘radically reshaping’ the concept of television

Over time, AT&T may add new features to AT&T TV that deliver on the company’s earlier promises. In the present, though, AT&T TV is still a lot like regular, old television. (AT&T)

AT&T spent months hyping up its new streaming TV service but AT&T TV has fallen short of the incredibly lofty expectations that the company set for the product.

John Donovan, CEO of AT&T Communications, earlier this summer called AT&T TV – which at that point was still referred to by AT&T as a “thin client” – the consumer product he’s most excited about since the iPhone.

“It radically reshapes what your concept of television is. We think we’re going to really be disruptive in the market on features and capabilities,” Donovan said.

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The reality is that AT&T TV adheres to several of the same concepts of pay TV that many consumers have come to know and loathe over the past few years. The service requires a two-year contract that comes with price hikes in the second year. The base “Entertainment” package costs $60 per month for the first year but jumps to $93 per month in year two. Same goes for “Choice,” which starts at $75 before jumping to $110, and “Ultimate,” which starts at $80 before jumping to $135. All three packages are also offered in specially priced bundles alongside AT&T broadband service.

All of these packages include 500 hours of cloud DVR storage, access to third-party apps like Netflix, an Android TV-based device with Google Assistant voice remote and three free months of HBO, Cinemax, Showtime and Starz. But these prices don’t include fees of up to $8.49 per month for regional sports networks or $10 per month for additional receivers.

Along with the not-so-radically-different pricing for AT&T TV, many of the service’s bells and whistles are already available elsewhere in the market. AT&T touts universal access to all your different video subscriptions, but that’s pretty much what services like Amazon Channels, Apple TV Channels, the Roku Channel and Comcast Xfinity Flex already offer.

AT&T TV also promises that its streaming box will serve as a smart home control hub, but again that’s something that Xfinity Flex announced months ago.

Similarly, the TV Everywhere apps along with 4K and Bluetooth support are other AT&T TV features that show up in lots of other products and services. Although, AT&T TV allowing unlimited simultaneous recordings through its cloud DVR is a nice feature.

All in all, AT&T TV isn’t going to radically reshape any consumers’ concepts of television. But what it will do is help AT&T transition more customers away from higher cost services like DirecTV and U-verse while maintaining healthy margins, according to UBS analyst John Hodulik.

“…Although it is unclear whether the high end of the market will pay full price for a streaming service,” Hodulik wrote in a research note.

He added that the product should lower costs in the company’s entertainment segment but likely won’t be enough to drive a dramatic shift in subscriber trends. AT&T lost nearly one million video subscribers in the second quarter and with another million video customers that AT&T is transitioning out of promotional pricing, those losses should continue in the third quarter. UBS predicts AT&T will tally up 838,000 premium video subscriber losses this quarter.

AT&T has clearly communicated that video subscriber losses are going to continue and has placed the focus on financial metrics within its entertainment business. Indeed, despite massive video subscriber losses in the second quarter, the company’s video entertainment revenues only dipped slightly, down 1.7% to $8.03 billion. The company’s overall entertainment group revenues fell just 1% year over year and operating income rose 2.6% to approximately $1.5 billion.

AT&T TV could help continue driving those positive revenue and income trends along with providing a boost to some of AT&T’s other businesses. Both Hodulik and Alan Wolk, co-founder and lead analyst at TV[R]EV, agreed that AT&T TV and its proprietary streaming box will be an addressable advertising win.

“Having their own box seems like a way for them to expand Xandr’s partnership with Comscore (Comscore collects set top box data) and use that to sell addressable advertising across all AT&T properties,” Wolk told FierceVideo.

So, for now, it appears that AT&T TV will be good for business if not necessarily a mind-blowing new consumer technology. Over time, AT&T may add new features to AT&T TV that deliver on the company’s earlier promises. Last year, AT&T CEO Randall Stephenson outlined a possible technology that would serve short, targeted ads on the television when it knows viewers have a smartphone in their pocket, and allow them to further engage with the marketing while not interrupting the programming on the big screen. Something like that would radically reshape the concept of television.

In the present, though, AT&T TV is still a lot like regular, old television.

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