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Understanding AT&T’s Video Strategy for Growth

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Increase in mobile video data traffic

Currently, major US telecommunications carriers view video services as future growth drivers. Wireless networks are increasingly coming under pressure regarding their speed and latency as more and more viewers stream videos online. 

A huge chunk of mobile data traffic is made up of video streaming, which drives wireless carriers’ data consumption.

The combination of cellular services and mobile video streaming has been a great add-on for both carriers and consumers. Carriers can cater more to customers wanting to switch from traditional pay-TV services to mobile video streaming services. Consumers get anytime, anywhere access to video streaming with the help of unlimited data plans. The best example of a cellular service with mobile video streaming is AT&T’s (T) DIRECTV Now.

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DIRECTV Now

AT&T’s new DIRECTV Now over-the-top (or OTT) service was launched in November 2016 with a headline promotional offer for its Go Big package at $35 per month for over 100 channels. 

With zero-rating, DIRECTV Now’s promotional pricing saw strong initial adoption. AT&T reported ~200,000 video net additions in 4Q16, driven entirely by the adoption of DIRECTV Now in its first month.

Growth potential

The introduction of AT&T’s DIRECTV Now OTT video service in 4Q16 should help AT&T to diversify its US wireless business. 

The OTT video streaming space has huge growth potential. Users have been subscribing to OTT services in greater numbers than ever before, mainly due to the high monthly bills they’re paying their cable and satellite TV providers. A 4Q16 report from Digitalsmiths suggests that ~35.0% of users pay more than $100 to their pay-TV providers every month. 

AT&T’s other competitors in the video streaming space are Netflix (NFLX), Amazon (AMZN), Verizon’s (VZ) Go90, and Alphabet’s (GOOGL) YouTube.

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