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AT&T’s DIRECTV Now’s Position in the Declining Pay-TV Market

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May. 3 2018, Published 11:12 a.m. ET

Cord cutting is denting pay-TV customer base

Like other pay-TV service providers, AT&T (T) is facing a decline in its US subscriber base due to cord cutting. Consumers tend to prefer OTT (over-the-top) video streaming services over higher-priced traditional cable or satellite connections. Amazon (AMZN) Prime, Netflix (NFLX), and Alphabet’s (GOOGL) YouTube are some major names in the OTT video streaming market.

In 1Q18, traditional pay-TV companies such as AT&T, Comcast (CMCSA), and Charter Communications lost customers. AT&T lost 188,000 satellite TV customers and added 1,000 U-verse TV customers in 1Q18.

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AT&T focuses on DIRECTV Now

Amid the growing popularity of online streaming, AT&T (T) has shifted its focus from its struggling Pay-TV business to OTT video streaming services to attract customers. Since its acquisition of DIRECTV in 2015, the telecom company has been focusing on bundling its wireless and video services to win customers. AT&T’s DIRECTV Now OTT streaming services directly deliver content to customers via the Internet. The company is now prepared to launch its next-generation DIRECTV Now platform, driving profitability with new product capabilities such as a cloud DVR (digital video recorder) and additional video stream. 

Growing DIRECTV Now subscribers

In 1Q18, AT&T added 312,000 subscribers to its DIRECTV Now streaming service. Whereas net additions rose year-over-year in 1Q18 from 72,000 customers, they fell quarter-over-quarter from 368,000 customers. As of March 31, AT&T had added 125,000 DIRECTV Now video customers since its acquisition of DIRECTV, reaching ~1.5 million customers. It continues to expect robust growth from bundling opportunities.

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