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Can AT&T Grow Its DIRECTV NOW Customer Base?

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AT&T’s DIRECTV NOW

In the second quarter, AT&T (T) added 342,000 customers to its DIRECTV NOW video streaming service compared to 152,000 DIRECTV NOW net subscriber additions in the second quarter of 2017. This growth is primarily due to the growing preference for more flexible, modestly priced video streaming services over higher-priced traditional television packages. DIRECTV NOW had ~1.8 million customers on June 30.

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During the Goldman Sachs Communacopia Conference held on September 12, Randall Stephenson, AT&T’s CEO, discussed the company’s DIRECTV NOW business. Stephenson stated that AT&T had seen a better-than-anticipated subscriber reaction to a recent price increase in DIRECTV NOW, the company’s over-the-top (or OTT) video service.

Stephenson added, “Actually, the customer base has been very resilient to the price moves as we put new functionality in the platform, cloud DVR and multiple streams. And so we’ve not seen the deterioration in subscribers that we anticipated. And in fact, we’re continuing to grow through this.”

The company expects robust growth in its DIRECTV NOW customer base from improved services as well as bundling opportunities.

Peer comparisons

Amazon’s Prime Video and Netflix (NFLX) are AT&T’s other competitors in the video streaming market. Netflix gained 5.1 million new subscribers worldwide in the second quarter, and it had ~130.1 million subscribers on June 30.

As the over-the-top services rapidly gain subscribers, traditional pay-TV providers are losing subscribers. In the second quarter, AT&T lost 286,000 satellite TV subscribers and gained 24,000 U-verse TV customers.

In the second quarter, Charter Communications (CHTR) and Comcast (CMCSA) lost 73,000 and 136,000 residential video customers, respectively.

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