Q. I know you’ve been covering DIRECTV for a long time so can you explain why they have lost so many subscribers. I’ve been a DIRECTV subscribers for more than 20 years and I can’t understand it. (I also worked for them for three years!) They’ve lost more than anyone by far. It’s not just cord cutting. It’s AT&T and DIRECTV. What in your opinion did AT&T do wrong with DIRECTV? — James, Huntington Beach, California.
James, you are right. I have covered DIRECTV before it even launched on June 17, 1994. In fact, I traveled to Indianapolis in the summer of 1994 to watch DIRECTV go on sale there, just the second city in the nation to get it. (DIRECTV started in five test markets in the summer of 1994 before going nationwide.)
There were long lines of people waiting for the store to open, and many of them told me they were excited to finally get a serious alternative to cable TV. I decided to buy a DIRECTV dish and receiver myself, brought it back with me and installed it on my balcony in my 18th floor apartment in Alexandria, Virginia. I was the first person in the Washington, D.C. area to have DIRECTV.
Over the years, as a magazine and web site journalist, I reported on the meteoric rise of DIRECTV, which eventually became the leading pay TV provider in the nation. I also partnered with Nielsen Media Research in the 1990s to do four comprehensive studies of the DIRECTV audience to determine why Americans were so taken with the ‘little’ dish.
So, yes, I know a little about DIRECTV. And it’s stunning to me as well that the satcaster has lost between five and six million subscribers since AT&T purchased it in 2015 for $49 billion. DIRECTV had more than 20 million subscribers five years ago, more than any satellite or cable operator.
While it’s true that all pay TV operators have lost subscribers in the last several years due to escalating prices, and cord-cutting, DIRECTV’s subscriber decline is unparalleled. By comparison, Comcast has lost slightly more than two million video subscribers since 2015, compared to DIRECTV’s five to six million defections. (AT&T has stopped disclosing the exact numbers for DIRECTV, choosing instead to lump their results with U-verse’s numbers.)
The reason for the decline can be found in plain sight.
In 2015, John Stankey, who was then AT&T’s entertainment chief (he’s now the company CEO), was asked by USA Today what was AT&T’s vision for DIRECTV.
“The simple vision is we want customers to take their premium entertainment experience and enjoy it anywhere,” Stankey told the newspaper’s Ed Baig. “Our job as a company that provides connectivity, whether it’s fixed or mobile, is to make sure that they have that portability. Nobody else has the kind of toolset (and) breath that we now have–scaled content, world class mobile network, broadband network, the technical compatibilities to take all that out over an IP infrastructure. That’s the big strategic thrust.”
Notice that Stankey does not mention the word, satellite. He’s basically describing taking DIRECTV’s customers to a streaming platform, which has been AT&T’s primary mission since the sale. In November 2016, less than two years after the purchase, the company launched DIRECTV Now, a live streaming service which later became AT&T TV Now. Company executives in November 2016 gushed over DIRECTV Now, saying it would eventually replace satellite TV.
While AT&T TV Now has sputtered, AT&T has doubled down with a new streaming offering called AT&T TV. Again, the company says it’s designed to replace DIRECTV.
You see, James, AT&T has never believed in satellite TV. They just wanted DIRECTV’s subscribers, the vast majority of which they believed could be converted to streaming soon after the sale.
Why did they want to convert them? Streaming is far less expensive than satellite. Far less.
AT&T’s master plan, however, has failed because the vast majority of DIRECTV’s subscribers have not made the switch to AT&T’s streaming services. If they have made any switch at all, they have decided to drop DIRECTV because AT&T has failed to invest in the satellite TV service, often leaving it without new technologies, and new sports channels. AT&T has also failed to invest in DIRECTV’s customer service team, which was once pay TV’s best. (It’s not anymore.)
Meg James of The Los Angeles Times chronicled this strange strategy in her excellent January 31, 2020 story entitled, ‘Nearly 3 Million Subscribers Ditched DIRECTV Last Year. Will AT&T Do the Same?’ The story illustrates how AT&T decided to spend their research and development dollars on streaming rather than DIRECTV.
“Since AT&T took over, hundreds of (DIRECTV) workers have been cut. Software applications and other functions have been outsourced to IBM and Accenture. The company has been eager to sell smaller assets, including its regional sports networks, and has even considered abandoning its exclusive arrangement with the NFL for the popular NFL Sunday Ticket, according to knowledgeable people who requested anonymity because they’re not authorized to comment publicly. The NFL package — a signature DirecTV offering for 25 years — has become a money loser for AT&T, given the high cost of sports rights,” James wrote.
The plan didn’t work. But to Stankey’s credit, he’s not pretending that the company had a different strategy in 2015, one that misfired for other reasons. Last week, Stankey was asked during an investors call if AT&T believed it still needed DIRECTV. (There have been sale rumors.)
“You can go back and look at comments I made, I think, very early on and post-transaction of DIRECTV that we didn’t necessarily make that move because we love satellite as a technology,” Stankey told analysts. “We like the customer base. It was an opportunity to move that customer base into the right technology platforms moving forward.”
He’s right. It was an opportunity. But the opportunity is gone. And now AT&T has little choice but to sell DIRECTV to the highest bidder.
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— Phillip Swann