DirecTV Now ‘sustainable’ at $50 price point, AT&T CEO says

AT&T CEO Randall Stephenson (AT&T)

DirecTV Now withstood another quarter of subscriber losses, but AT&T CEO Randall Stephenson said, at current price levels, the product is reaching sustainable levels.

During today’s earnings call, Stephenson called back to DirecTV Now’s recent moves on OTT pricing and rationalizing content lineups. DirecTV Now has shifted to selling two packages, both of which include HBO: DirecTV Now Plus offers more than 40 channels for $50 per month, and DirecTV Now Max offers more than 50 channels (including Cinemax) for $70 per month.

“I think we’re getting to a place now where the product, we all look at it and say, ‘OK, this is a sustainable place if you can get the advertising revenues to where we think we can get them,” Stephenson said.

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He said that DirecTV Now saw some fallout as AT&T shifted pricing and tried to get the profit equation right.

“But, now we’re in the market at this $50 price point, and we’re early on in terms of getting the new platform out there,” said Stephenson. “But, we’re seeing good uptake on the new platform and new pricing.”

He did say that DirecTV Now could still lose more subscribers in the second quarter, but that the product would do “decent growth” in the second half of 2019.

RELATED: AT&T loses another 83K DirecTV Now subs and 544K pay TV subs in Q1

DirecTV Now is coming off its second straight quarter of subscriber losses after a sustained period of growth. The service lost another 83,000 subscribers after losing 267,000 in the previous quarter. DirecTV Now’s subscriber base is hovering right around 1.5 million, which still puts it slightly ahead of where it was at this time last year.

AT&T attributed last quarter’s dramatic DirecTV Now subscriber losses to the rollback of promotional pricing. But, it’s worth noting that the service is now offering a new promotion – $20 off per month for the first three months – which could help drive some near-term growth.

Stephenson also addressed his company’s net traditional pay TV subscribers losses, which totaled 544,000 during the quarter. A majority of those losses likely stemmed from the DirecTV satellite TV service and Stephenson said that the upcoming launch of a “thin client,” which he described as “our satellite replacement product,” should help moderate those losses particularly heading into 2020.

“We think this product is going to have a really good appeal for people down-market in terms of their expectations on video pricing,” Stephenson said. He added that DirecTV churn is disproportionately at the low end, and that a thin client helps DirecTV meet that lower end at a price point.

AT&T has been testing a new full DirecTV package that relies on an IP connection and a proprietary Android TV-based set top box. This would eliminate the need for a satellite dish and an installation truck roll, therefore substantially lowering the cost of customer acquisition.

DirecTV Now has already begun offering streaming packages that align with the branding and pricing of DirecTV’s satellite service offerings.

Linda Hardesty contributed to this report.