Cord-cutting is denting pay-TV customer base
Pay-TV service providers such as AT&T (T) are facing a decline in their US pay-TV subscriber base numbers due to cord-cutting. Many consumers prefer over-the-top (or OTT) video-streaming services instead of subscribing to traditional satellite or cable TV services. OTT service providers Amazon Prime and Netflix are among the established players in the video streaming market.
In the third quarter, AT&T missed 359,000 satellite TV customers and added 13,000 U-verse TV customers. Traditional pay-TV companies Comcast (CMCSA) and Charter Communications (CHTR) are also losing residential video customers. On June 30, Comcast reported a loss of 136,000 residential video customers. Charter Communications lost 73,000 residential video customers in the second quarter.
Growing DIRECTV NOW subscribers
Amid its declining pay-TV subscriber base, AT&T (T) is focusing on its streaming service offering, DIRECTV NOW, to attract customers. AT&T acquired DIRECTV in 2015, and its DIRECTV NOW OTT streaming service has helped the company retain its customers.
AT&T added 49,000 subscribers to its DIRECTV NOW service, bringing the total subscribers to the streaming pay-TV package to 1.86 million on September 30. However, analysts had expected 287,000 net new customers in the DIRECTV NOW service, and its net additions totaled 296,000 in the third quarter of 2017.
The acquisition of Time Warner also gave AT&T access to Time Warner’s 10.0% stake in Internet video provider Hulu. AT&T’s WarnerMedia segment is planning to launch a streaming video service in the fourth quarter of 2019, which is expected to stream live and on-demand HBO programming through apps and smart TVs.
Walt Disney (DIS) and Walmart (WMT) have also entered the streaming space to garner market share. Disney is launching its direct-to-consumer streaming service in 2019, and Walmart is also planning to launch a video streaming service.