AT&T video losses are accelerating, with the carrier reporting it lost 390K traditional video subscribers in the third quarter of this year. That significant loss of Directv and U-verse TV subscribers is somewhat offset by net adds of 300K DIRECTV NOW subscribers, AT&T’s streaming OTT offer. The end result is a loss of 90K video subscribers.
AT&T cited competition in the traditional pay-TV business and cord cutting as primary culprits for the decline in an 8-K filing. Makes me wonder about cannibalization – how many existing AT&T pay-TV customers are cutting that traditional cord in favor of the lower priced OTT offer, DIRECTV NOW? Hurricanes and the disruption they have caused also played a role, AT&T noted in the filing.
Perfect Storm Brewing
There is somewhat of a perfect storm forming with regards to pay-TV. There are fierce competitive battles taking place between cable companies, satellite DBS providers, and IPTV operators. Verizon is making some pretty aggressive offers for Fios TV in the northeast for example, offering a double play of 50 Mbps broadband and TV for $80/month.
Combine that with the growing offers of streaming OTT TV, which in effect offers a traditional pay-TV channel line-up, packaged with VOD, and TV Everywhere, and we have a competitive environment like we’ve never seen before. There are at least seven legitimate streaming OTT options now (maybe more) that reach most of the country, including Sling TV, YouTube TV, and PlayStation Vue, among others.
AT&T is in the cross hairs of much of this, given satellite TV seems to be taking much of the brunt of cord cutting, and they’ve already decided to retire U-verse TV, meaning there’s only decline coming from that segment. Satellite DBS providers suffer more because of their inability to bundle broadband with video. AT&T can do that in some markets, but not everywhere.
The communications conglomerate does recognize this decline though. It’s one major factor driving their desire to acquire Time Warner, adding significant diversification. AT&T’s CEO Randall Stephenson also recently acknowledged their video future lies in OTT delivery, which eventually will replace satellite. Maybe the market is taking care of that strategy for them.