AT&T this week launched AT&T TV, a new subscription streaming television service that uses an Android-based internet set-top, in 10 markets. But the way it’s priced and packaged looks very similar to cable and satellite TV services — in other words, AT&T TV isn’t targeted at the cord-cutter crowd.
It’s basically designed as a way for the telco to migrate customers from its DirecTV satellite and U-verse services, to deliver a premium, full-price (i.e. healthy margin) TV bundle more cost-effectively by providing for subscriber self-installation. Unlike other “virtual pay-TV” internet services, AT&T TV carries promotional pricing contingent on a traditional two-year contract, and subscribers are subject to activation and early-termination fees.
Analysts are unsure whether AT&T TV will see significant uptake. AT&T chief Randall Stephenson has promised that the new product will be the “workhorse” for the company’s pay-TV business over the next few years.
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“[I]t is unclear whether the high end of the market will pay full price for a streaming service,” while AT&T TV will be unattractive to cost-conscious consumers, UBS Securities analyst John Hodulik wrote in a research note Wednesday.
The base AT&T TV “Entertainment” package starts at $59.99 per month in the first year — climbing to $93 monthly in the second year. The top-tier “Ultimate” package is $79.99 per month for first 12 months, jumping to $135 monthly thereafter. That pricing is well over other value-oriented over-the-top streaming platforms, like YouTube TV ($50 per month), Hulu With Live TV ($45 per month), or Dish’s Sling TV (which starts at $25 per month).
Moreover, note that AT&T TV requires a separate broadband service, with a recommended minimum of 8 Mbps per stream. AT&T is selling a bundle that includes broadband plus AT&T TV for $89.99 per month for the first 12 months going up to $133 monthly ($93 for TV and $40 for internet).
“We believe [AT&T TV] alone is unlikely to drive a dramatic shift in sub trends but should lower costs in [AT&T’s] Entertainment segment while providing a boost to addressable advertising,” Hodulik wrote.
AT&T TV is currently available in Orange, Calif.; Riverside, Calif.; West Palm Beach, Fla.; Topeka, Kan.; Wichita, Kan.; St. Louis, Mo.; Springfield, Mo.; Corpus Christi, Texas; El Paso, Texas; and Odessa, Texas.
The newly launched AT&T TV does include some bells and whistles: The 4K-enabled set-top integrates third-party apps from Netflix and Pandora, and includes a voice remote with the Google Assistant built-in. But other pay-TV services, like Comcast’s Xfinity X1, offer similar features.
AT&T TV allows a maximum of three concurrent streams and includes three months of free access to HBO, Cinemax, Showtime and Starz, as well as a video-on-demand library with 55,000 titles and 500 hours of DVR storage.
Meanwhile, AT&T is phasing out the “DirecTV Now” brand name, replacing it with “AT&T TV Now.” Pricing for AT&T TV Now starts at $50 per month, with about 45 channels including HBO.
The launch of AT&T TV comes after the company reported a 778,000 net loss in DirecTV satellite and U-verse TV customers and lost 168,000 DirecTV Now subs for the second quarter of 2019. In the last 12 months, AT&T has lost about 2 million traditional pay-TV customers, down 8.6% year over year, and DirecTV Now’s subscriber base has shrunk 26%.
The pain will continue into the current quarter: UBS expects AT&T to drop 838,000 premium TV subscribers given program blackouts and subscribers dropping off after their promotional pricing ends. According to Hodulik, in 2020, AT&T TV should help the telco “maintain stability” in the profitability of its Entertainment segment while “sub losses moderate” with the last of the promotional DirecTV subscribers rolling off.