Directv Now logoThe user interface for AT&T’s DIRECTV NOW over-the-top (OTT) streaming video platform will soon get a “radical upgrade,” said AT&T Chairman and CEO Randall Stephenson at an investor conference this morning. DIRECTV NOW upgrades also will include support for a cloud DVR and three simultaneous video streams, he said.

The initial price for DIRECTV NOW was $35 and some industry observers questioned whether the company could make any money on the offering at that price point. Stephenson said the upgraded DIRECTV NOW offering should be able to command a price of $40 to $60 monthly.

Also on tap for AT&T – an OTT video skinny bundle that will cost $15 a month and will not include sports programming or local channels, Stephenson said. That offering, he said, will be “paid for with advertising” and will launch when the company’s acquisition of Time Warner is completed. At another investor event today, John Donovan, CEO of AT&T Communications, said the skinny offering will be called “Watch TV” and will be designed primarily as a mobile offering.

DIRECTV DBS Alternative
Stephenson also offered some additional information about an upcoming AT&T offering that will include the same content as the company’s current DIRECTV offering delivered via direct broadcast satellite (DBS) but which will instead be delivered over the top. The company expects to charge $80 to $90 a month for that product, offering a substantial discount in comparison with the DBS equivalent.

AT&T can offer the product at that price point because subscriber acquisition costs will be one-quarter of those for the DBS offering, Stephenson said. He noted that with the OTT-delivered option, the company will not have to deploy technicians to install a satellite dish on customers’ homes. Instead, customers will receive a device delivered via UPS and will plug it into their television set and broadband connection.

Beyond DIRECTV NOW Upgrades
Assuming the AT&T/ Time Warner deal closes, AT&T also sees opportunities to increase video advertising revenues substantially.

Stephenson said traditional television advertising today commands a price (measured as cost per thousand or CPM) of $7-$8. By targeting advertising using augmented customer data, AT&T expects to be able to command a CPM in the $30-$35 range. (The company has been touting targeted advertising for some time, although it’s current price estimates are a bit lower than they were last year.)

He also hinted that the company might make additional acquisitions to support this strategy. “With M&A, we will have a full programmatic ability to engage,” he said.

Also in the works is a platform that will enable advertisers to design and manage their own advertising programs, Stephenson said.

Stephenson made his comments at the J.P. Morgan Global Technology, Media and Communications conference, which was also webcast.