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Why AT&T Is Bundling DIRECTV with Wireless Offerings

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AT&T’s DIRECTV Now

In 4Q16, AT&T (T) launched DIRECTV Now OTT (over-the-top), an online video streaming service. This service was extensively marketed with a headline promotional offer for its “Go Big” package (100+ channels for $35 a month). January 9, 2017, marked the end of this offer. AT&T’s DIRECTV Now witnessed booming popularity among customers in the introductory phase, mainly owing to its promotional pricing along with a zero rating.

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AT&T released explicit subscriber numbers for DIRECTV Now in 2Q17 for the first time. The carrier added 152,000 DIRECTV Now subscribers, which was offset by 351,000 traditional pay-TV subscriber losses. DIRECTV Now has around 500,000 subscribers and is set to see robust growth from improved services as well as bundling opportunities. Further, AT&T’s management is planning to roll out cloud DVR (digital video recorder) and some additional packages for its OTT product later in the year.

OTT video service growth potential

The introduction of AT&T’s DIRECTV Now online video streaming service could help the company branch out from its long-established wireless space. There is tremendous growth potential with the OTT video streaming service. In comparison to the previous years, more customers are opting for OTT services. The major reason for this shift is customers’ high monthly bills from cable and satellite TV firms. As depicted in the above graph, a 1Q17 report from Digitalsmiths suggests that ~37.1% of users pay more than $100 per month to their pay-TV service provider.

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

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