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AT&T Spotlights Next-Gen Video Plans

Alan Breznick

Despite increasingly hefty subscriber losses for its satellite TV and IPTV services, AT&T remains strongly committed to video and intends to proceed with an ambitious upgrade plan for its new OTT video service, DirecTV Now.

Speaking on the company's fourth-quarter earnings call late Wednesday, AT&T Inc. (NYSE: T) executives reiterated their abiding faith in video and spelled out more of their plans to introduce a next-gen version of DirecTV Now this spring. They also spelled out plans to deploy a new "home-centric," thin-client streaming device to support DirecTV Now and other popular OTT video services by the end of the year.

"We're very bullish on video," AT&T Chairman, President and CEO Randall Stephenson asserted to analysts on the earnings call. "Our customers are consuming more video, not less."

These developments come against the backdrop of continued strong subscriber gains for DirecTV Now, AT&T's one-year-old skinny-bundle OTT video service, and continued heavy sub losses for its two legacy pay-TV services, DirecTV and U-verse TV. In the fourth quarter, the operator reported that it gained 368,000 DirecTV Now customers, boosting its customer count to close to 1.2 million. At the same time, though, it shed a combined 207,000 U-verse TV and DirecTV subscribers, with the bulk of those losses coming from the former satellite TV powerhouse.

As a result, AT&T ended up the fall quarter with a net gain of 161,000 video subs, raising its total video customer count to 25.2 million. But it still closed out 2017 with about 300,000 fewer video subscribers than at the end of 2016 because the U-verse TV and DirecTV sub losses more than offset the DirecTV Now sub gains through most of the year.

Despite these up-and-down results for the year and the fact that DirecTV Now's profit margins are quite slim at best, AT&T officials continue to insist that they've found the right formula for making video pay off. They argue that the new streaming service will stoke greater growth and become more profitable over the next several years while the linear TV services will become more efficient and less costly to maintain.

"We've assumed traditional linear video would be in a declining mode since we bought DirecTV," Stephenson said. "We've run these transitions before and we think we're pretty good at it … As traditional linear declines, DirecTV Now, we think, can offset that.”

Want to know more about video and TV market trends? Check out our dedicated video services content channel here on Light Reading.

As part of the video transition, AT&T appears to be cutting positions at its linear video services. With the company's overall head count down about 14,500 to 254,000 at the end of 2017, many of those jobs have presumably been cut at the legacy DirecTV operation.

AT&T executives said the DirecTV Now upgrade plan will include the integration of cloud DVR service, the addition of a third video stream (currently, DirecTV Now supports two concurrent streams per account) and user interface enhancements. Previously, the operator said the upgraded service will also support 4K video, offer individual viewer profiles and deliver an expanded line-up of VoD titles.

As for the planned new "home-centric" streaming device, Stephenson described it as an inexpensive, "very thin client" that will connect to any broadband service and feature a voice-controlled interface for search. Besides supporting DirecTV Now, the device will also enable access to and search of other leading OTT services, including Netflix, Amazon, Hulu and YouTube.

Stephenson said the new device will deliver "a premium live video experience in your home with the flexibility and ease of use [that] you would expect out of an OTT service.” He also predicted that the device "will actually drive cost structure of the traditional video product down, so that you can preserve margins in the traditional video as you grow in the over-the-top applications and video services.”

Asked who's signing up for DirecTV Now, AT&T EVP and CTO John Stephens said the OTT video service's subscribers continue to be split equally between cord-cutters/cord-shavers and those who have never subscribed to a pay-TV service. He noted that a "disproportionate" number of DirecTV Now customers are millennials and people living in multiple dwelling units.

“We still haven’t seen a dramatic uptick in customers that are shifting from our full-value product to DirecTV Now, but we continue to watch that carefully," Stephens said. "We do think we have an opportunity to grow video customers."

Stephenson said closing AT&T's pending deal for Time Warner remains the company's top priority despite the US government's strong opposition to the deal. "While we remain open to finding some reasonable solutions to address the government’s concern, we do expect this case will ultimately get litigated in court," he said. The trial of AT&T's case is set to start March 19. (See AT&T to Spend Trump Tax Bump on Fiber, 5G 'Foundation'.)

— Alan Breznick, Cable/Video Practice Leader, >Light Reading

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3/8/2018 | 10:14:30 AM
DTVN Still needs some work
I'm one of the DTV customers that will be dumping my dish in favor of DTVN or some other streaming service.  I pay too much for the DVR and the boxes for each TV I own.  DTVN still needs to mature (2 streams vs. VUE's 5 streams, no DVR vs. others' DVR features, NO smartTV integration, etc...)  They do have a decent channel line up though.  If they come up with an app for smart TV's that gives the smartTV's remote full or near full functionality like the dish service, they'd have tons of customers coming on board.  I use Amazon's firestick and FireTV on my smartTV's but there's limited functionality with that remote and the DTVN app.
2/16/2018 | 10:25:06 AM
Video Choices
It may be interesting to see what AT&T can do with it's DirectTV and the opportunity to do some skinny bundles and OTT. While it's not a good sign that it "closed out 2017 with about 300,000 fewer video subscribers than at the end of 2016," some experimentation with ofering various services to old and new customers may well boost it's video stream revenues and profits with a bit of luck. 
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