Using an aggressive promotional strategy to grow its virtual pay TV service, DirecTV Now, to a user base of nearly 2 million in just two years, AT&T will likely report fourth-quarter subscriber declines for the platform when it reports earnings on Wednesday.
During its analysts day presentation in late November, AT&T executives warned analysts to expect retraction for DirecTV Now, with prices rising and an aggressive promotional strategy being phased out.
DirecTV Now, a streaming service delivering bundles of broadcast and cable channels over the open internet, finished the third quarter with 1.858 million customers, with year over year subscribers growth in the third quarter declining by more than 83%.
AT&T announced a $5-a-month price increase across its four tiers last summer, bringing the base price up to $40 a month.
But part of the loss of energy was due to the phase-out of popular promotions, some of which brought users free OTT devices, like Apple TVs, and some of which steeply discounted the service for those who tied it to unlimited wireless plans. AT&T said that as many as 500,000 DirecTV Now users were on $10-a-month promo plans in 2018.
Currently, AT&T is merely offering users 1 week free of service.
Speaking right after analyst day at the UBS Global Media and Communications conference, AT&T CEO Randall Stephenson said work is underway to “thin the content out” on the DirecTV Now bundle and “get the content out that’s really relevant to the consumer.”
He also said further price hikes might be in store for DirecTV Now.
“We’re talking $50 to $60,” he said (transcript here). “We’ve learned this product, we think we know this market really, really well. We built a 2 million subscriber base. But we were asking this DirecTV Now product to do too much work. So we’re thinning out the content and getting the price point right; getting it to where it’s profitable.”
AT&T is the largest pay TV operator in the U.S., controlling 25.2 million subscribers as of the end of September 2018. With the user bases for linear services DirecTV satellite and AT&T U-verse eroding fast, the previously fast growth of the virtual DirecTV Now platform assured AT&T that consumers were at least being kept within its ecosystem.
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