Why Does AT&T TV Require Two-Year Contracts?

12 comments

Q. I was reading your story about AT&T TV and was thinking of getting it. But it has a two-year contract. Why is that? Isn’t streaming supposed to be all about cutting the cord and having some freedom? — Aimee, Suitland, Maryland. 

Aimee, that’s a good point. Today’s live streaming services, such as YouTube TV, Hulu Live and Sling TV, allow you to cancel their service at any time. (Although you might have to pay the remainder of the current month.) In fact, AT&T’s own AT&T TV Now, formerly known as DIRECTV Now, permits no-strings cancellation.

The ability to drop service without paying a penalty (or returning equipment) is one reason why many cable and satellite subscribers have signed up for the new offerings.

But AT&T TV, which delivers programming over an Internet-based set-top, does require a two-year agreement, just like DIRECTV, also owned by AT&T. The only difference between the two here is that DIRECTV’s charges a $20 a month penalty for each month left in your agreement if you cancel while AT&T TV requires a $15 a month termination fee.(Note: AT&T does offer a 14-day free trial, but that won’t help you on day 15 and beyond.)

The two-year agreement, which I have recommended against here, seems out of step with today’s new technologies. Many industry observers, including yours truly, expressed puzzlement over the stipulation when AT&T launched the new service. (In addition, AT&T charges a $19.95 ‘activation fee,’ another pay TV relic.)

So why does AT&T require a two-year agreement? Doesn’t the company understand it could stop people from signing up?

Yes, but AT&T believes that the two-year contract, whether applied to DIRECTV, AT&T phone service, or AT&T TV, helps prevent what the industry calls ‘churn’ — customers canceling service.

Churn is expensive because a company such as AT&T spends significant money on obtaining each customer, but if he or she can cancel after a month or so, that investment (marketing, set-top manufacturing, etc.) is quickly lost.

The two-year agreement ensures that a new customer will stay with the service. That is, unless he or she wants to pay that penalty.

Of course, with a two-year agreement, fewer people may subscribe, particularly considering that AT&T TV is a new product. Why sign up for two years for a product you’ve never seen before?

But AT&T’s philosophy is that it’s willing to forgo signing up some ‘lookie loos’ to get a subscriber base of committed users.

We’ll see in the coming months how that strategy plays out.

Aimee, hope that helps. Happy viewing, and stay safe!

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— Phillip Swann

12 comments on “Why Does AT&T TV Require Two-Year Contracts?”

  1. I’m a long time subscriber of DirecTV and I feel duped by AT&T. They had a “subscriber base of committed users” that likely would have followed them anywhere had they treated us right. However, the decline of customer service and channel selection together with increased package rates have many users jumping ship. Reliable internet and cable are not available everywhere and services like DTv are (were) a Godsend to us folk in rural areas. With traditional television stations 50+ miles away and mountains in between, over the air tv is not reliable choice either. It looks like my DVD player is about to get dusted off since I’ve about had enough of being jerked around. Here’s to 20+ years of loyalty DirecTV! *snip snip*

  2. Att TV does have a 2 year contract but it also has a 14 day risk free trial period in which I canceled in first 14 days of sign up, not of when the att TV streaming device is activated you get a full refund of the activation fee and first month’s charge. So it gives customers a chance to try it out before committing to the 2 year contract.

  3. And it doesn’t have a lot of channels to choose from not like the at&t now package or slingtv which doesn’t have local TV,YouTube tv isn’t offered in my area.I have seen this thing called tv buddy which looks slot like the Chromecast.

  4. The whole marketing mark up about cost make sense for the company not for the customer 😠😠😠, that’s the reason why many subscribe’s are leaving the cable and satellite industry it comes with very little strings attached , no equipment to pay for, a hold lot cheaper, channels you don’t have to pay for. At&t is set them selves for another down fall in this market their plan makes no sense for the subscriber.

  5. You didn’t mention it also allows for AT&T to hike up the rates on the second year to what ever the prevailing rate is, so somewhat like writing a blank check with your only safety net being the termination fees. I would be happy to do a 2 year contract if they froze the pricing on it and was fair.

  6. I have been a Direct TV Now customer from Day One. There special has gone from $35 for life to $60 a month in a little over 2 years. Zero programming changes. Only reason still with them is New Subscribers would pay $85 for same Service. Do not do contract they screw you on 2nd year Pricing.

  7. Its a rip off and with the premium package which I have I spend 350 a month on just TV no internet or anything and of course I’m stuck in a contract

    1. Did you ever think there are NOT enough hours in a day to watch all the channels you subscribe to ?

      Switch to a LOWER PACKAGE and save A BUNDLE

      you can do it anytime

  8. In Feb someone called asking if I’d like direct tv for $25.
    00 a month for a yr..I said you bet.Guy comes on Feb.21 and installsit.A few min. after he got here a girl shows up wanting to know if I wanted to bundle and I’d even get a new phone for free.I said I want to keep my phone and phone num..For 45 min she worked on my phone.She screwed it all up.I finally had to take it to an at&t store.They said my phone wasn’t compatable with at&t..4 days wit no phone.A few days later a woman calls wanting to know how I like my service.I told her it sucked.More infamurcials and sports than anything.I asked how much am I paying for this service.She said$60.00 a month not $25.00.I told her I wanted it turned off right then.They keep trying to take money off my card.This company scammed me.Then trying to get $600 from me..for early termination.Im going on every site I know and letting people know how low at&t are.
    .

  9. They suck and I had to make three calls to them within two weeks of service each rep told me something different after 3mo I cancelled and fought all the way to HR to not pay termination fees and in the end they sent out 2reps and found that all 4 techs that had come out never caught that I was wired commercially and not residential and my complaints were legit and it cost me$000 but they tryed to get me to stay with them and many good offers but the service sucks so I left them at&t a joke

    1. What is the Difference about “WIRING” between Residential and Commercial ?

      Each has the SAME DISH, Each has the SAME WIRE. and Each has the SAME Receiver,

  10. Dtv was the best but went att bought out the competition att little by little trying to fed out the best TV service and the world hopefully dish wake UP!

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