Why AT&T Is Focusing on DIRECTV NOW Customers

AT&T (T) is focusing on bundling its wireless and video services amid declining US pay-TV customers. Since the acquisition of DIRECTV in 2015, the telecom company is focusing on its DIRECTV NOW over-the-top (or OTT) video streaming service that directly delivers content to subscribers via the Internet. The company now anticipates targeting new product capabilities such as cloud DVR (digital video recorder) and other related services like 4K, pay-per-view, and digital advertising to drive its profitability.

In 4Q17, AT&T added 368,000 DIRECTV Now customers compared to expectations of nearly 300,000 subscribers in 4Q17. The net additions in 4Q17 also favorably compare with 267,000 customers in the year-ago quarter. DIRECTV NOW has now reached almost 1.3 million customers at the end of December 2017 and continues to expect robust growth from bundling opportunities. 

Telecom companies have been facing a decline in US pay-TV subscribers for the past few quarters due to cord cutting, which means that consumers are opting for OTT video streaming services as against subscribing to higher priced traditional cable or satellite connections. Services such as Amazon Prime by Amazon (AMZN), Netflix (NFLX), and YouTube by Alphabet (GOOGL) are some of the biggies ruling the OTT video streaming market.

As OTT video streaming services rapidly add customers, traditional pay-TV companies like Comcast (CMCSA) and Charter Communications are losing customers. AT&T lost 147,000 satellite TV customers and had to forego 60,000 U-verse TV customers in 4Q17.