nScreenMedia OTT multiscreen media analysis

CandW discuss why DirecTV Now isn’t part of AT&T’s video strategy

VideoNuze nScreenMedia podcast

AT&T lost nearly a million video subs in Q2. We explain what happened, the company’s new three-tier video strategy, and why DirecTV Now isn’t part of it.

Chapter 1: AT&T Q2 2019 video results (1:00)

From a video perspective, AT&T’s second-quarter results were a disaster. The company has lost so many premium TV customers that revenue decreased by a whopping $1 billion compared to Q2 2018.

Chapter 2: The three-tier future of video at AT&T (4:40)

AT&T has a plan to fix its flagging video fortunes. It will circle the wagon around three services: DirecTV, AT&T TV, and HBO Max.

Chapter 3: Why AT&T TV needs a dongle (8:40)

The company says that customers will need an HDMI dongle to watch AT&T TV. The requirement seems unnecessary with so many cheap TV connected devices around. I explain why the dongle might still be needed.

Chapter 4: Why DirecTV Now doesn’t fit in (17:00)

There just doesn’t seem to be room for DirecTV Now, AT&T’s entry into the vMVPD market. Will the company keep it around?

Chapter 5: Is the vMVPD category fading (19:50)

With DirecTV Now losing subs and Sling TV’s growth slowing, is the whole vMPVD sector already over-the-hill?

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One Comment

  1. AT&T has so many current and planned pay-tv offerings that you neglected to even mention one, WatchTV, a mobile-only vMVPD that is priced at $15/month, but given away free with some of their wireless plans.

    One of the reasons given to justify the debt-laden purchase of DirecTV was the buying power it gave AT&T with the TV networks, because with the combination of DirecTV and U-verse, AT&T became the largest MVPD.

    My guess is that when AT&T renegotiated their carriage deals for the combined DirecTV and U-verse, the networks wanted to negotiate separate contract terms for AT&T’s MVPD facilities-based carriage and AT&T’s planned OTT vMVPD carriage. Given AT&T’s MVPD carriage would be over both wireline (U-verse) and satellite (DirecTV), the delineation used may have been whether the service provided a set-top box to the consumer as a part of the service. That is one way the lawyers could have defined and carved out facilities-based carriage separate from OTT carriage. (This is purely speculation.)

    If that speculation is correct, then the new OTT service AT&T is launching with their own STB dongle would meet those terms intended only for facilities-based carriage, and allow AT&T to get facilities-based carriage terms for their OTT service.

    If this speculation is correct, it could also explain the de-emphasis of DirecTV Now. AT&T could have used DirecTV Now as just an interim OTT service while they developed their STB dongle. Otherwise, I agree with your observation that it doesn’t seem to make sense that anyone would launch an OTT-based vMVPD service that requires the customer to use a single-purpose set-top box dongle, In lieu of support for existing streaming devices.

    Finally, yes the pay-tv bundle is unraveling. With the advent of OTT delivery of video, the TV networks must no longer depend on facilities-based operators to deliver their content. The networks are going direct-to-consumer to cut out the operators and capture the operators’ pay-tv margins for themselves, in part to help pay for increasing content costs. The networks keep raising their carriage fees, and the operators pass those increases on to consumers, who are leaving the facilities-based bundles in droves.

    The obvious question to ponder is whether there is a viable long-term vMVPD business model, given the lack of differentiation that is possible. It seems we are quickly headed to a situation where there are a handful of dominant OTT TV Networks (Netflix, Amazon, Disney, Warner, Discovery, NBC/Universal, etc.), each with their own app. Apple, Google (Android TV), Amazon (Fire TV) and Roku all want to be the new aggregator of TV apps, the new bundling paradigm for pay-TV.

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