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AT&T TV Launch Grounds DirecTV

We meant to do that.

That was one of the essential takeaways AT&T president and chief operating officer John Stankey had for investors as to why the telco was displacing DirecTV with a streaming pay TV service just five years after paying $50 billion for the satellite-TV company.

The IP-delivered AT&T TV resembles traditional pay TV service, with proprietary set-tops. 

The IP-delivered AT&T TV resembles traditional pay TV service, with proprietary set-tops. 

“I think, back in July of 2015, after we closed the DirecTV transaction, we were pretty clear that at that point in time we didn’t see satellite delivery as necessarily a growth vehicle for entertainment moving forward,” Stankey said March 3 at a Morgan Stanley investor event. “We like the DirecTV customer base — we thought it was attractive. But we felt like the march needed to be to delivering entertainment over software.”

Launching nationwide after tests in 13 markets, AT&T TV is a kind of hybrid, matching over-the-top and traditional pay TV services. It’s delivered over the open internet to a proprietary Android TV set-top box, which means AT&T doesn’t have to launch satellites to support the service. It’s self-installed, so the operational costs of truck rolls are also factored out of the equation.

The Android TV-based system includes access to Netflix, YouTube and virtually every other OTT app through the Google Play digital store, so AT&T doesn’t have to worry about developing native platform integrations of SVOD services. Voice integration is also handled natively, through Google Assistant.

Conversely, AT&T TV is as much “traditional pay TV” as it is OTT. There’s a two-year contract involved, with a full bundle of around 70 channels in the base tier — including the Big Four broadcast networks and ESPN — priced at $50 a month in the first year before shooting up to $93 for the second 12 months. There are hidden fees, notably an $8.49-per-month regional sports network charge, and additional costs for adding more Android TV set-tops. And there are charges for early cancellation.

Stankey didn’t disclose how many customers AT&T TV has at this point, but said “we’re really pleased with what we saw” on the service’s March 2 nationwide launch day. With AT&T losing 4.1 million subscribers in 2019 across its incumbent pay TV services — DirecTV satellite, U-verse TV managed IPTV and the erstwhile DirecTV Now virtual MVPD service (now confusingly called AT&T TV Now) — AT&T expects its new video platform will reverse its currently high customer-churn trajectory in 2020.

AT&T TV is also seen as the cornerstone of the telco’s fiber-to-the-home broadband sales effort, now in 4 million homes. AT&T is hoping to have around 3 million more of them by 2022, and being able to bundle in a premium pay TV service is part of that business equation.

“We’re getting higher attach rates than what we would traditionally get in selling broadband with satellite,” Stankey said. “We saw higher growth rates than what we would typically see, and I think that’s driven by the fact that the product is an updated, more feature-rich product. And of course, the fact that we can now bundle it more attractively in certain areas, such as our fiber footprint and offer very, very attractive bundles on it, customers are aware of that and are interested to try and kick the tires on it.”

DirecTV Finds ‘Rightful Place’

With the introduction of AT&T TV, the telco’s existing pay TV services are either being marginalized or put out to pasture.

Stankey didn’t comment on U-verse TV, the 14-year-old IPTV service that ended the fourth quarter with only around 3.4 million remaining subscribers. News site Cord Cutters reported that AT&T is no longer promoting U-verse TV on the internet.

Likewise, Stankey only passingly addressed AT&T TV Now, the skinny-bundled vMVPD that had a promotion-fueled rocket ride to nearly 2 million subscribers in its first 20 months in the market, before AT&T turned off the loss-leader taps. But priced at $65 a month for 45-plus channels, AT&T TV Now would seem to be undercut and antiquated by AT&T TV, even though it is free of contracts and early-termination charges. Stankey described the vMVPD as merely an “iteration,” a technological step on the way to AT&T TV.

”We will continue to offer satellite and DirecTV where it has a rightful place in the market, places where cable broadband is not as prevalent.” — John Stankey, president and COO, AT&T

That leaves DirecTV, which has seen a base of more than 21 million subscribers whittle away to just more than 16 million as of the end of the fourth quarter. DirecTV also recently saw the departure of senior VP and chief content officer Dan York, culminating a series of top-level executive departures for the satellite-TV service that began when former DirecTV CEO Mike White left its El Segundo, California, headquarters when AT&T closed its $50 billion acquisition in summer 2015. Now, AT&T isn’t even branding its flagship pay TV service with the DirecTV name anymore.

“We will continue to offer satellite and DirecTV where it has a rightful place in the market, places where cable broadband is not as prevalent,” Stankey said.

Despite investor pleas for AT&T to divest the satellite TV asset, Stankey reiterated the telco’s position that it’s not likely to do that soon.

“I would tell you we don’t see it really running in the regulatory environment,” he said. “And I would also say, you have to be a little circumspect as an executive right now. If you're doing anything that requires approval, my read of the environment is, it’s a little unpredictable.”

Daniel Frankel
Daniel Frankel

Daniel Frankel is the managing editor of Next TV, an internet publishing vertical focused on the business of video streaming. A Los Angeles-based writer and editor who has covered the media and technology industries for more than two decades, Daniel has worked on staff for publications including E! Online, Electronic Media, Mediaweek, Variety, paidContent and GigaOm. You can start living a healthier life with greater wealth and prosperity by following Daniel on Twitter today!