Even as AT&T halts the sale of U-verse TV, the company is still seeking out ways to pump up the sub counts of DirecTV and AT&T TV, its new OTT-delivered, big-bundle pay-TV service.

AT&T is going in-house to help boost its video subscriber numbers by pitching a free year of HBO to new customers of both DirecTV, the satellite TV service that AT&T acquired about five years ago, and AT&T TV, a streaming service that was launched nationally last month following pilots in 13 US test markets.

Figure 1: The new AT&T TV service launched nationwide in early March.

The promotion enters the picture as AT&T attempts to slow the erosion of its pay-TV base and focus on more profitable, contract-based offerings. AT&T lost 1.16 million video subs in the fourth quarter of 2019 (including 945,000 DirecTV satellite and U-verse customers and 219,000 customers on the OTT-delivered AT&T TV Now service) and a whopping 4.09 million total video subs for all of 2019.

AT&T TV is now the company's video workhorse. Delivered via the Internet and employing a self-installation model, AT&T TV runs on an operator-supplied, 4K-capable Android TV box with integrated voice navigation (via Google Assistant). The service, which allows up to three concurrent streams per account, also includes a VoD library with tens of thousands of titles, integration of third-party apps such as Netflix and Pandora, and a cloud DVR with 500 hours of storage. AT&T tries to bundle the streaming service with its own broadband services where it can, but AT&T TV can run on any broadband connection (with a recommended connection of at least 8 Mbit/s).

Mirroring the kind of packaging and contract-based pricing used for traditional pay-TV services, AT&T TV's baseline Entertainment package starts at $49.99 per month for 12 months, with the price jumping to $93 per month after the promotional period ends. The service features more expensive tiers, including AT&T TV Choice (starts at $54.99, then rises to $110 per month after a year), and AT&T TV Extra (starts at $64.99 per month, then rises to $124 per month after 12 months).

Even as AT&T puts U-verse, its legacy IPTV platform, out to pasture, DirecTV will live on, albeit in a diminished way. Speaking at an investor conference last month, AT&T President and COO John Stankey said DirecTV will continue to be offered "where it has a rightful place in the market. That means DirecTV will be emphasized only in areas where broadband availability is weak or non-existent.

AT&T continues to sell AT&T TV Now (formerly DirecTV Now), a no-contract OTT-TV service starting at $55 per month.

Priming the pump for HBO Max
AT&T's HBO-focused promo is also coming about as WarnerMedia inches toward the May launch of HBO Max, a super-sized subscription VoD service that will sell for $14.99. A cheaper, ad-supported version is expected to launch sometime next year.

AT&T's initial plan is to convert about 10 million of its own pay-TV subs on the legacy HBO service to the new HBO Max offering. While the latest promotion for free HBO is being used as a carrot to entice new AT&T TV and DirecTV subs, it could also seed the market for more customers that AT&T can eventually convert to HBO Max.

AT&T's original forecast for HBO Max is 75 million to 90 million worldwide, including 50 million in the US, by 2025.

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— Jeff Baumgartner, Senior Editor, Light Reading