A class action suit has been filed alleging that AT&T pumped up the sub count for its DirecTV Now streaming service (since rebranded to AT&T TV Now) to mask "serious technical problems due to premature roll-out."
AT&T has recently reported sub losses across multiple platforms, including AT&T TV Now.
An amended federal securities class action complaint was filed late Friday (Sept. 13) in the Southern District of New York on behalf of various individuals and union pension fund stockholders.
The complaint claims that AT&T and "Executive Defendants," which includes CEO Randall Stephenson, "falsely depicted DirecTV Now as a fast-growing product with increasing subscribers and strong margins that would offset declining subscriber levels in AT&T’s other video products, including its mature satellite DirecTV product."
Instead, the plaintiffs allege, that depiction was a "mirage" created by salespeople "dropping DirecTV subscriptions into customer accounts without their knowledge using short-term promotions" that were still used in public statements about the service's "dramatic growth" despite the expiring discounts that led to lots of churn.
The suit also alleges AT&T salespeople were directed to bundle multiple accounts in a single activation, even creating false e-mail addresses and running a credit card multiple times to create imaginary accounts.
The law firms filing the suit (Pomerantz LLP and Labaton Sucharow LLP) said their investigation found that fake account practice to be "massive and nationwide."
That effort to pump up the service, they said, after the company signaled, following first the 2015 acquisition of DirecTV and the 2018 acquisition of Time Warner and its new video assets, that DirecTV Now would be its key entry in the online delivery space--Netflix, Hulu, Amazon, Vudu--that was the future of video distribution.
The suit asks the court to certify the class, then proceed to a jury trial where it says AT&T should be found guilty of violating securities laws and the court will award compensatory damages, costs, and whatever else the court deems appropriate.
AT&T spokespeople were not available for comment at press time.
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Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.