Pay-TV continued to be a sore spot for AT&T in the first quarter of 2020, as the company lost a total of 1.03 million video subs in the period. Those losses comprised 897,000 "premium" subs (DirecTV satellite and U-verse TV) and 83,000 OTT video customers.
AT&T overall lost fewer pay-TV customers in Q1 2020 than the 1.16 million subs lost in the prior quarter, but the Q1 figure was up from a loss of 627,000 video subs in the year-ago period.
AT&T ended Q1 with 19.36 million pay-TV subs (18.57 million premium subs and 788,000 OTT-TV subs), a drop of 4.5 million from the year-ago total of 23.86 million.
Update: AT&T's premium video base is now shrinking by 16.09% year-over-year, the fastest rate of decline yet, Craig Moffett, analyst with Moffett Nathanson, explained in a note issued today. "[F]or the second straight quarter, they lost 4.6% of their subscribers over a three-month period, suggesting that the annualized rate of decline remains nearly 20%."
AT&T expects the road for its pay-TV business to remain rough during the COVID-19 pandemic.
While pay-TV cord-cutting has not accelerated in the near-term and has actually slowed down a bit during the pandemic, "we're expecting that there's going to be a stressed economic environment in the second half of the year at some point," said John Stankey, AT&T's president and COO. "We may see more pressure on that as we move through the year."
AT&T did not disclose sub numbers for AT&T TV, its new, contract-based, OTT-TV service that runs on an Android TV box and supports a self-install model, but was pleased with the initial results following the service's recent national launch.
Sales volume of AT&T TV has reached expectations and customer feedback on the new product has been stronger than expected, Stankey said, noting that AT&T plans to continue ramping up that product throughout the year.
"That's a great product to have in this [pandemic] situation. It's a low-touch product. Often times, customers self-install," he added. "It's clearly showing that the product is closing some of the gaps that we know the satellite product was a little bit soft on."
Following the national launch of AT&T TV, AT&T has largely relegated sales of the DirecTV satellite TV service to more rural areas and places without sufficient broadband and has recently halted sales of U-verse TV, its legacy IPTV service.
Stankey noted that WarnerMedia is making progress with distribution deals for HBO Max, the supersized subscription VoD service that will launch on May 27 and starts at $14.99 per month. In addition to agreements to bring HBO Max to AT&T's own customers, WarnerMedia has already cut distribution deals with Charter Communications and YouTube TV.
Stankey estimated that distribution agreements are in place to cover nearly half of HBO's embedded wholesale base and more than two-thirds of its retail base, with more deals expected to be inked prior to the HBO Max launch.
On the broadband side of the ledger, AT&T lost 73,000 customers overall in Q1 2020, as additions of 209,000 FTTP-based subs were overtaken by a loss of 253,000 non-fiber IP subs and 29,000 DSL customers.
AT&T ended Q1 with 14.04 million broadband customers, down from 14.45 million a year earlier. Its IP fiber sub base reached 4.09 million (up from 3.06 million a year ago), while IP non-fiber customers dropped to 9.45 million (versus 10.76 million a year ago) and DSL customers dipped to 492,000 (versus 632,000 a year earlier).
Update: Moffett said this marks the third straight quarter that AT&T's IP broadband subs base (FTTH and U-verse, not including legacy DSL) fell sharply. "Fiber connections simply aren't growing fast enough to keep up with U-verse declines," he added.
On the financial end, AT&T's Entertainment Group posted revenues of $10.51 billion, down from $11.32 billion. Revenues at Warner Media dropped to $7.35 billion from $8.37 billion in the year-ago quarter.
- AT&T sets May 27 launch for HBO Max
- Charter cuts deal to distribute HBO Max
- AT&T TV streams nationwide
- AT&T halts sale of U-verse TV
- AT&T aims to keep selling DirecTV 'where it has a rightful place'
— Jeff Baumgartner, Senior Editor, Light Reading