Q. Is there anything new from AT&T on selling DIRECTV? I know they just released the new financial statement. Did it have anything in there about it? I am very interested in this happening because I don’t like AT&T being the owner. — Stella, Topeka, Kansas.
Stella, AT&T just released its third quarter financial report in which the company revealed that it lost 627,000 video subscribers. That includes DIRECTV, U-verse, AT&T TV and AT&T TV Now, but the lion’s share of defections likely came from DIRECTV. (AT&T does not break out subscriber numbers for DIRECTV, U-verse and AT&T TV.) While the sub decline is improved from last year’s third quarter, that’s still a lot of customers hitting the cancel button.
Besides that, the statement offers little guidance to when, or even if, AT&T plans to sell DIRECTV, which news reports say it’s actively trying to do.
But after the third quarter report was released, AT&T executives, including CEO John Stankey, took questions from financial analysts and the company chief had some revealing things to say about the state of the pay TV and satellite TV industries, in his view.
Phil Cusick, managing director at JP Morgan, asked Stankey how DIRECTV fits into the company’s future plans. The executive stated emphatically that he believes AT&T TV, its new Internet-based TV service, makes more sense than the nation’s largest satellite TV service.
“The AT&T TV product is a much more natural fit in terms of how customers want to use a pay TV service today than the satellite product is,” Stankey replied. “And when we compare it with broadband, which as you see we’ve got improved volumes on broadband, that helps our video business. So as we continue that momentum and we think about what we can do in the next year that can help the video business as well, I’m not going to suggest to you that it’s anything but a mature business that’s going to continue some degree of decline.”
Stankey added that AT&T is trying to reduce DIRECTV’s subscriber defections, but he refused to comment on “any speculation” that the company is trying to sell it.
You might think that comment would suggest AT&T is prepared to keep DIRECTV if a suitable sale partner is not found. But Stankey’s next remark on the pay TV industry, which includes DIRECTV, provided more evidence that AT&T believes the category is still in rapid decline.
Asked by Credit Suisse analyst Doug Mitchelson if pay TV will continue to lose subscribers to cord-cutting, Stankey gave an eyebrow-raising reply:
“I still maintain there’s a certain number of sports consuming households that are going to be the stickier households in the pay TV bundle that when we kind of get down to that, 55 million, 60 million household range, we’re probably going to see a little bit of a plateauing as a result of that,” Stankey said.
The pay TV industry, which includes satellite, cable and telco TV services, now has around 75 million households. If Stankey is correct, it could lose another 15-20 million in the next few years, which one report says would leave the industry in serious peril. It’s hard to envision AT&T keeping DIRECTV if it believes the industry could still lose that many subscribers.
The TV Answer Man will continue to monitor the AT&T-DIRECTV situation and report back here when new developments occur.
Stella, hope that helps. Happy viewing, and stay safe!
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— Phillip Swann