DIRECTV Now: AT&T Is Getting Desperate


News and Analysis
Would you like to see the very picture of desperation?

Well, here it is:

Picture of Randall L. Stephenson

That’s a picture of AT&T CEO Randall Stephenson, whose company revealed today that DIRECTV Now, its live streaming service, lost a net of 83,000 subscribers in the first quarter. Stephenson also reported that DIRECTV and U-verse, its two traditional pay TV outfits, lost a net of 544,000 subscribers in the first quarter. That means the three video services lost a combined 627,000 customers in the first three months of 2019.

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If that doesn’t make someone desperate, I’m not sure what does.

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But although the losses by DIRECTV and U-verse are somewhat staggering, it’s the DIRECTV Now defections that probably has Stephenson (and his company’s shareholders) climbing the walls. As a live streaming service in the Internet age, DIRECTV Now is supposed to be part of a growth industry! But with the first quarter losses added to the net loss of 267,000 subscribers in the 2018 fourth quarter, DIRECTV Now has lost roughly 17.5 percent of its subscribers over the last six months. (The streamer now has approximately 1.5 million subs left.)

The inability to grow DIRECTV Now’s base, or at least sustain it, has really turned Stephenson into a desperate man. Let me explain.

The AT&T chief last January acknowledged that DIRECTV Now’s promotional prices in 2018 helped trigger an impressive growth spurt during the year. But he also admitted the low prices, which included a $10 a month offer for three months, made DIRECTV Now a bottom line loser. With programming acquisition costs escalating, there was no way that DIRECTV Now could generate a profit with such low monthly fees.

So Stephenson vowed to remove the promotional prices (albeit using corporate speak; see below) and focus on what he likes to call the ‘quality subscriber,’ one who is content with paying a higher monthly bill. In fact, AT&T raised the base price for DIRECTV Now to $50 a month to try to ensure that revenue would exceed the costs.

“We told you in November there were 500,000 of (DIRECTV Now) customers on the promotional pricing,” Stephenson told financial analysts in a conference call, following the release of the fourth quarter report. “And we started allowing those customers to a trade out that obviously has a significant impact on dilution (making DIRECTV Now less profitable). You know, the product has been dilutive in 2018. (Again, dilutive is corporate speak for not being profitable.)

“This is one of the main drivers of (making DIRECTV Now less profitable) and this is also one of the primary triggers as we move into 2019 to getting us to EBITDA stability, as we begin to get the promotional subscribers out and now we have a customer base that’s left on the streaming that’s growing, remaining customer base is growing and is a highly engaged customer base and has good churn characteristics.”

But with no promotional prices — and a higher base price — subscribers continued to flee, which led to the loss of 83,000 customers in the first quarter. So guess what Stephenson and his team decided to do? That’s right. Bring back the promotional prices. DIRECTV Now is now offering $20 a month off the first three months for new customers.

That brings the base price down to $30 a month. While it’s not $10 a month, it’s still too little to make that promotional customer a profitable one. But AT&T and Stephenson are clearly desperate to get subs moving north again.

It would seem after Stephenson’s lecture on promotional pricing, the company wouldn’t go right back to it so soon. But it’s like a recovering alcoholic. It’s easy to quit when times are good. But when trouble arises, the temptation of a shot of Jack Daniels can be too much to handle.

And right now, with DIRECTV, U-verse and DIRECTV Now all bleeding subs, a shot of Jack probably would look pretty good to Randall Stephenson.

— Phillip Swann

8 comments on “DIRECTV Now: AT&T Is Getting Desperate”

  1. I have been a U-Verse customer for 10+ years. In the past when they sent me a bill and the price went up I would call to cancel and they would reduce it back to my previous price. This time the price for my package for TV and Internet went from $140 to $190. When I called to get a reduction the provider said there were no reductions and when I said I was cancelling he said ok. Not sure what they are up to but it would seem to me you would want to keep a on-time paying customer rather than go through the expense of chasing new subscribers.

  2. Karma. That’s what happens when these huge corporations merge and merge until there’s nowhere else to go. Now they’re the content creators/ distributors combined with the last mile. To big to fail? Leveraged up to the hilt. Cost of outside content going up. Splintering of the content into other competitors who raise prices to them, or shut them out altogether. Yes, like the Titanic, too big to get out of their own way.

  3. No one mentions the “OVERSEAS” Call Centers.
    The OLD DirecTV (Before AT&T Bought them) was PROFITABLE, FRIENDLY, Satisfied your request, Reasonable Priced, worked Beautifully and SPOKE ENGLISH
    Now when you try to call, the call goes to some place that does NOT speak English well, Does NOT know, Care, Understand, or give a HOOT if you are Satisfied, Happy, or still want to stay with DirecTV..

    If AT&T wants to get OUT of the HOLE Stephenson DUG, Sell DirecTV, Abandon TV, COMPLETELY for now and .REPLACE Stephenson,

    Lower the prices on the OLD RELIABLE LAND LINES and get BACK into the Phone Business. Wire the Country COMPLETELY with FIBER for Internet and Phone, “Maybe TV later”, after ALL BUGS are Ironed OUT of the Fiber Technology, have ALL TV Providers get their heads OUT of the Clouds on PRICING and ELIMINATE ALL OVERSEAS Call Centers. Re-Open LIVE Person Call Centers, NO Auto Attendants, and ONLY in the USA. AT&T USED to be the GOLD Standard of the Telephone Industry.

    Ever wonder why a LOT of AT&T Land Line Customers FLED ? NO Customer Service, and INSANE HIGH Prices.

    I Dialed (611- Repair Service) on my Land Line the other day, got an Auto Attendant, it said press “2” for REPAIR Service. When I pressed “2” it said “The number has been DISCONNECTED and hung up.

    What ever gave AT&T the Biggest and Best “TELEPHONE Company” the Idea they should Jump Ship and get into another Business they have NO how to run ?

    The problem with TV Pricing is WE pay for the Service AND ALSO are FORCED to watch Commercials. Talk about getting the SHAFT.
    They should get ONLY one or the other. Like HBO.
    You Pay and NO Commercials. or FREE and have to watch Commercials, not Both

  4. My issue is i am a cord cutter and directv now was a good alternative to sling. but there has been issues with minimum bandwidth needs (12.5Mbps) that my service cant handle…not when Phil, Hulu, YouTube, Netflix and Amazon all require less and are offering more channels for less money! Not to mention things like FuboTV, PlutoTv and more! You cant be the big dog and do what you want when the little dogs are more numerous and hungrier.

  5. I left Directv when AT&T took them over. I had been a customer since the late 90’s because I loved their NFL Sunday Ticket. I knew what was going to happen. Companies like AT&T can’t and don’t know how to compete. They are use to their cable monopolies or Duopolies. Now with multiple steaming services they are stuck. Cable companies always have terrible customer service. They just don’t give a crap because in the past the money kept rolling in despite the terrible customer service.

    Now there are companies working to offer Internet service via low earth orbit satellite. This will be interesting. Finally some possible competition for cable companies. It will be fun to watch AT&T and their ilk scramble to compete for once.

    1. Most of you comments are correct, EXCEPT AT&T is NOT a “CABLE Company”
      AT&T = Am. Telephone & Telegraph
      AT&T sends Most of their calls Overseas, that explains the TERRIBLE Customer service.
      You are Right, AT&T should NEVER have been allowed to Buy DirecTV. A DISASTER, thanks to the Govt. allowing the Buy Out. DirecTV USED to be the GOLD Standard in TV.
      I have Spectrum,(Cable/Internet) so far the calls are answered in the USA, They are good.

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