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1 August 2019

Beginning of the end for DirecTV as AT&T TV Now mouthful preferred

Enough is enough for AT&T. For the past few quarters now, evidence has been stacking up and pointing to how the US operator requires a fundamental video strategy switch up to cushion the demise of not just the traditional pay TV business but also the underperforming DirecTV Now service. AT&T’s latest crack of the whip will see it rebrand DirecTV Now as AT&T TV Now – distancing itself from the legacy satellite TV branding in another contentious embrace of cord cutting.

 

From a consumer point of view, the new seven-syllable name has received widespread ridicule across social media and written off as a marketing mouthful mishap. For context, AT&T TV Now contains the same number of syllables as Netflix, Hulu and HBO combined. Regrettably, AT&T TV Now screams laziness over ambition and innovation.

 

As underwhelming as AT&T TV Now is from a marketing perspective, Faultline Online Reporter interprets the rebranding as the first of many moves in a much larger transformation initiative.

 

DirecTV Now didn’t even make its third birthday but the writing was on the wall ever since subscribers began dropping off in their droves and the OTT video service HBO Max was announced for arrival in Spring 2020. Could we now question the longevity of the DirecTV satellite business? Could turning its back on the DirecTV brand suggest AT&T is setting the stage for a much more disruptive move? A sale, perhaps?

 

Reading between the lines suggests something drastic, but it would ultimately depend on the performance of AT&T TV, its Android TV-based skinny client which is due to start trials next quarter. CEO Randall Stephenson has reiterated the company’s commitment to the DirecTV satellite business, last week saying the business would be sticking around for a long while. But of course, he would say that.

 

Given DirecTV Now’s persistent subscriber losses throughout late 2018 and early 2019, with the latest quarterly losses clocking in at 83,000, marking a dramatic turn of events from the 342,000 net subs added in the same period last year, AT&T has acted relatively quickly and we would not be surprised to see the two services – DirecTV Now and AT&T TV – folded together in the future.

 

DirecTV Now’s fall from grace boils down to two factors – price hikes and poor user experience. AT&T TV’s price point is yet to be determined although is expected to undercut DirecTV Now’s $50 a month fee, and of course the newer IP-delivered service isn’t exempt from streaming issues. These upcoming beta trials for AT&T TV will be critical for ironing out any QoE flaws which have hampered DirecTV Now’s uptake. As for the streaming stick, the manufacturer hasn’t been released yet and a similar story of ambiguity surrounds the content strategy – specifically how it will differ from Watch TV ($15 a month) and HBO Max ($6.99 a month). Somewhere in-between Watch TV and DirecTV Now in terms of price then, potentially.

 

“In the coming weeks, your DirecTV Now app will change to AT&T TV Now, but will continue to deliver the same great streaming entertainment. As an existing customer, your service will carry on as usual without any interruptions,” said a statement from AT&T to customers.

 

As underscored last week in AT&T’s Q2 earnings write up, the operator is precariously close to churning out 1 million subscribers a quarter across its video businesses and rising fast, which would see its 22.9 million existing video footprint (21.6 million satellite and 1.3 million DirecTV Now) disappearing in maybe 6 or 7 years if this snowballing effect intensifies.

 

Somehow though, faced with a crumbling pay TV business and fragmented, confused OTT video strategy, AT&T’s financials look steady. Last week it reported total consolidated revenue for Q2 up 15.3% to $45 billion, operating income spiking to $7.5 billion, from $6.5 billion in the year-ago quarter, primarily to the Time Warner acquisition contribution. WarnerMedia subscription revenues of $3.5 billion, comprised of $1.9 billion from Turner properties and $1.5 billion from HBO, plus advertising revenues of $1.3 billion, helped offset revenue declines in legacy wireline services, domestic video and wireless equipment.

 

Our coverage around the AT&T video plan of action has taken on an importune tone in recent years, so despite its lazy rebranding tactic employed this week, we can at least accept that the operator is making pragmatic moves, of sorts.