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DirecTV Now Reaches the Launch Pad

Though many questions remain, several have been answered as AT&T is poised to unleash DirecTV Now, its new over-the-top TV service.

For starters, the baseline DirecTV Now service will cost $35 per month and offer more than 100-plus “premium” channels when it debuts sometime in November, Randall Stephenson, AT&T’s chairman and CEO, revealed last Tuesday (Oct. 25) at The Wall Street Journal’s DLive conference. That price would undercut PlayStation Vue’s “Elite” tier, which features 100-plus channels starting at $44.99 per month.

“This isn’t the junk that nobody wants,” Stephenson said. “We think this is big,” he added, noting that the intent is to bring a “new, different competitor [to] the cable ecosystem.”

AT&T, which is trying to acquire media/ programming giant Time Warner Inc. (see Cover Story, page 6), has not revealed its starting lineup, but it has announced digital distribution agreements for DirecTV Now with several top-tier programmers, including Viacom, NBCUniversal, Discovery Communications, Scripps Networks, A+E Networks and Time Warner’s Turner Broadcasting System.


It also appears that DirecTV Now will provide access to some live, local broadcast-TV stations right out of the chute. According to information that appeared temporarily on the DirecTV Now website ( last week, the service will carry ABC and NBC live streams in “select markets.” Those markets weren’t revealed, but there’s an expectation that they will include NBC and ABC owned-and-operated stations.

The DirecTV Now website also shed some light as to which streaming platforms will be supported early on. The service will initially be available via Amazon Fire TV boxes, Apple TV (fourth generation), select Google Castcapable devices, Web browsers and Android and iOS mobile devices. Support is “coming soon” to Google’s Chromecast streaming adapter and Amazon’s Fire TV Stick. Notably absent from the group are Roku players and Roku TVs, as well as gaming consoles such as the PlayStation 4 and Xbox One.

The DirecTV Now site also noted that customers will be able to try the service for free for seven days, have the option to add on HBO and Cinemax, and have access to a video-on-demand library of more than 10,000 titles.

DirecTV Now’s target is the 20 million homes or so that have left the “premium content ecosystem,” Stephenson said. AT&T can hit its price point in part because of the apps-based approach that doesn’t require a satellite dish, truck rolls or traditional set-tops, he said.

“If you can bring a compelling price point and a compelling content package and some innovation with it, we are absolutely convinced that this is going to be very, very attractive for a large group of customers who really aren’t even in the market today,” Stephenson said.

Early on, AT&T is nailing up enough capacity to support about 1 million simultaneous DirecTV Now customers, according to a report from Day Rayburn, executive vice president for and principal analyst at Frost & Sullivan. He said AT&T will be using “at least three CDN partners” for DirecTV Now, including Akamai, Level 3 Communications and Limelight Networks.


Despite AT&T’s exuberance about DirecTV Now’s prospects, a top industry analyst poked some holes in the OTT’s service’s initial business case.

A “good estimate” of the monthly programming expense for DirecTV Now is “around $34,” Craig Moffett, analyst at MoffettNathanson, wrote in a research note that likened DirecTV Now’s initial foray, based on available estimates, to the “Entertainment” package for traditional DirecTV service, which includes ESPN. That would leave a gross margin per subscriber of only $1, not enough to cover subscriber acquisition and other costs.

Using Sling TV as a “very rough proxy” with OTT subscriber acquisition costs and outlays tied to transport, storage and computing, Moffett said an OTT TV service would need to be priced at about $45 more than content costs to achieve true economic indifference between DirecTV’s regular satellite- TV service and an OTT subscriber at the unit level. “That is, DirecTV would have to price their DirecTV Now product at around $80,” assuming, at this point, DirecTV Now currently excludes CBS and Fox fare.

“Like running with scissors, it probably won’t be life-threatening — the number of subscribers they will cannibalize won’t be large enough to inflict a mortal wound to their own business, and the single-stream limitation and inherent drawbacks of an OTT service will similarly limit the damage to the pay TV ecosystem overall,” Moffett wrote. “Still, we believe DirecTV is playing a dangerous game.”