Q. I read your article about AT&T losing so many DIRECTV customers. What do you think they should do to make the service better? Or they should just get rid of it and move on? What do you think AT&T should do with DIRECTV? — Monica, Reno, Nevada.
Monica, what a great question that is! AT&T has lost more than six million DIRECTV and U-verse customers combined since taking over the satellite TV service in 2015. Although cord-cutting is a contributor, AT&T’s TV losses are far greater than any other pay TV service, and it’s become abundantly clear that the telco doesn’t understand how to run a TV business.
So, what should it do with DIRECTV?
AT&T would like to start transferring DIRECTV subscribers to its new Internet-based service, called AT&T TV. That would enable the company to reduce the costs of running a satellite-based operation, and possibly, keep prices from rising due to overall fewer expenses. In that scenario, AT&T would also reduce the number of people dropping TV service due to ever-escalating monthly fees.
But that’s not a feasible option in the short term. There are still 16 million DIRECTV subs and they have dishes and receivers. You can’t just snap your fingers and hope they’ll all switch to a new, relatively untested venture that doesn’t even have all the channels that DIRECTV does. (For instance, AT&T TV doesn’t offer the NFL Sunday Ticket.)
So, to rephrase the question, what should AT&T do with DIRECTV now?
There are three obvious options, but likely not all (if any) appealing to AT&T.
AT&T could try to sell DIRECTV to Dish, or merge with its satellite rival. This is easier said than done, particularly considering Dish is still run by Charlie Ergen, arguably the most difficult negotiator in the business. But my guess is that Ergen would be interested; he’s lusted after DIRECTV for years, and the two companies even agreed on a merger nearly 20 years ago only to have the FCC squash it for anti-competitive reasons.
2. Recommit to What Made DIRECTV Great
In 1994, DIRECTV launched and the satcaster soon acquired millions of subscribers thanks to an unique channel lineup, exemplary customer service, and the latest in technology features. But as Meg James recently noted in the Los Angeles Times, AT&T has oddly never embraced the satellite business although it paid $49 billion to acquire DIRECTV.
“AT&T has slashed funds that had been devoted to recruiting new DirecTV subscribers and used that money instead to develop new platforms (such as AT&T TV and AT&T TV Now), according to analysts,” James writes.
It’s as if AT&T executives woke up the morning after the sale and said, ‘Oh my God, what did we do?!”
While many DIRECTV subscribers are fed up with AT&T, it’s not too late for the telco to recommit itself to making DIRECTV great again, to borrow a phrase. The company could launch a well-publicized initiative that promised to make every DIRECTV customer a happy one with greater investment in customer service programs, technology, and yes, channel acquisition. Instead of saying no to almost every new channel, DIRECTV could say it’s adding SportsNet LA (TV home of the Dodgers), the Pac 12 Network, and a few others. It would be costly, but it would send a signal to existing subscribers that AT&T is willing to make sacrifices to keep them on board.
3. Close Down the Satellite Business In 2023
AT&T could announce that it plans to close DIRECTV in a few years so existing customers need to start transferring their subscriptions to AT&T TV. (January 2023 would be a good time for the closure because the company’s NFL Sunday Ticket contract expires after the 2022 season.) The telco could offer discounts and other perks for subscribers who make the move early. As part of the effort, AT&T could stop installing dishes; future customers would be encouraged to subscribe to AT&T TV.
Undoubtedly, DIRECTV would lose some subscribers in the transition period, but it would ensure a quicker switch to a less-expensive platform (AT&T TV.)
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— Phillip Swann