Where the big US skinny bundles stand head-to-head as 2017 closes out

AT&T has given itself a big pat on the back this week for reaching 1 million DirecTV Now subscribers one year after the OTT streaming service launched. Yet here at Faultline Online Reporter, our projection that it would need to acquire around 2 million subs in the same time frame, shows that DirecTV Now is not fulfilling its potential, never mind offsetting dramatic pay TV losses.

DirecTV Now got off to a slow start, but momentum has picked up towards the end of this year, as AT&T reported 787,000 subscribers at the end of September, meaning over 233,000 net additions in just two months. Provided it keeps the ball rolling, DirecTV Now could close Q4 with 350,000 new sign ups, which could see the service well on its way to 2 million subscribers by halfway through next year, therefore closing the gap between its closest skinny bundle rival Sling TV, which has an estimated 1.7 million subscribers since launching in January 2015.

The announcement from AT&T provides a good opportunity to tally up and compare subscriber numbers for the top US skinny bundle services and MVPDs as we approach the new year. The table below shows PlayStation Vue in third place with 455,000 subscribers, while YouTube TV has picked up 325,000 subs since launching in April this year, followed by Hulu’s live offering, the newest of the bunch, with 150,000 subscribers, and finally FuboTV with 100,000 subs, according to data from investment banking firm Guggenheim Securities. Other estimates have Sling TV as exceeding 2 million subscribers, but we feel these are inflated. HBO Now is out in front with around 2.5 million subs, while estimates have CBS All Access and Showtime OTT at around 2 million apiece.

Sling TV’s run rate has slowed to around 150,000 subscribers a quarter, giving DirecTV Now a good chance of catching it, particularly with AT&T’s promise to roll out a new UI, a cloud DVR, individual profiles, 4K UHD support, an additional concurrent stream and 10,000 new VoD titles to bring its library up to over 35,000, accompanying some 200 live channels. These “finishing touches” will roll out in the coming months, and AT&T is also pushing a $25 discount for the first month to new subscribers.

Unfortunately for AT&T, an accelerated uptake of DirecTV Now comes hand in hand with an accelerated pace of cord cutting. It saw record losses in the last quarter as 390,000 linear TV subscribers cut the cord, while 300,000 were picked up by DirecTV Now. Today AT&T has over 1 million less video subscribers than when it merged with DirecTV in May 2014, including those DirecTV Now subs. Of course, the situation would be far worse if there was no skinny bundle to take up the slack of cord cutting.

A growing subscriber base of DirecTV Now subscribers means over the next five years or so, AT&T will evolve from a company with 26 million video customers with an ARPU of $107 a month, to one with about 23 million subs, of which about 4.8 million of those pay a reduced ARPU of between $50 to $60 a month. We calculate that if this many customers shift over to DirecTV Now at $60, and that AT&T’s current level of cord cutting is sustained, then by 2021, AT&T Entertainment video revenues will fall by about $2 billion over the entire period, or $400 million each year. A similar story is true for the future of Dish Network, potentially on an even more destructive scale.

Last month, AT&T claimed that around half of all DirecTV Now signups are cord cutters or cord nevers, of which 10% have made the transition from traditional U-Verse and DirecTV services. That leaves half a million subscribers who have kept their traditional TV service after subscribing to DirecTV Now, but many of these will be cord shavers and will not sustain a monthly bill of this size for long – with the swing in favor of DirecTV Now.

Over 20% of current cable, satellite or IPTV subscribers in the US are considering switching to a cheaper OTT TV service such as Hulu’s Live TV, Sling TV or DirecTV Now, according to a recent survey by RBC Capital Markets of 1,200 US consumers sampling the whole population including those without pay TV services. It also found that only 55% of all consumers expressed long term commitment to legacy pay TV.

“This milestone is an incredible testament to the thousands of hours many people spent working to bring this product online and continually improving it during the past year. We’re thrilled so many customers have come to love DirecTV Now and can’t wait to bring them a host of new features in 2018,” said David Christopher, president, AT&T Entertainment Group.

Subscriber figures for HBO Now, CBS All Access and Showtime OTT are more difficult to calculate, partly due to secrecy and partly down to signups coming in peaks and troughs in sync with releases of hugely popular titles attracting mass subscriber influxes, as is the case with HBO’s Game of Thrones and CBS’ new Star Trek series. CBS All Access and Showtime OTT have estimated subscriber bases around the 2 million mark each, as CBS CEO Leslie Moovnes said earlier this year that the company expected to surpass a combined OTT subscriber base for the two services of over 4 million by the end of this year.

Time Warner reported back in February 2017 that it had hit 2 million domestic subscribers on HBO Now, and it was then reported in July, when season 7 of Game of Thrones kicked off, that it had surpassed 3.5 million subscribers, but the latest figure includes viewers picked up via other platforms such as Amazon Channels. Therefore, we have estimated HBO Now to have around 2.5 million subscribers in the US today as interest will have trailed off following the Game of Thrones finale, although HBO Now is likely to continue leading the pack throughout 2018, with the exception of course of Netflix, which has over 52 million US subscribers and counting.