AT&T is planning yet another streaming video service. Unlike its DIRECTV NOW offering, it will be comparable to the existing DIRECTV satellite service but will use a new smaller media player box, understood to be 4K capable, without the need for a dish.
AT&T Communications chief executive John Donovan told analysts the hardware will be cheaper, thinner, and lighter, while the operating costs will be lower. He said the company anticipated passing a lot of the cost savings to the customer.
“It will extend our footprint,” he said. “It will not only have a lower price point, but it will have margins that are similar and therefore better returns because there will be less upfront costs.”
The expected price point will be around $80 to $90 a month, which is significantly less than the satellite service, but significantly higher than the DIRECT NOW offering. Subscriber acquisition costs will be a lot lower, as there is no need to send someone to install a satellite dish and receiver. The new box will simply be delivered by courier and customers will plug it into their television and connect to their broadband service.
Ultimately, it does not require fleet of spacecraft in orbit above the earth. It also enables AT&T to deliver the service to premises where it is not possible to install a dish.
Meanwhile Randall Stephenson, the chairman and chief executive of the AT&T group, told analysts at another investor conference that the existing DIRECTV NOW online service will get a radical upgrade. This will include support for network video recording and three simultaneous video streams.
DIRECTV NOW was launched at a competitive price point of $35 a month, which left little if any margin. He said the new DIRECTV NOW offering should be able to command a price of $40 to $60 a month.
AT&T is also planning a cheaper service, apparently to be called Watch TV, which will not include sports programming or local channels. It is expected to cost around $15 a month and is intended primarily as mobile offering, presumably to be bundled with some AT&T mobile services. The plan is that it will be subsidised by advertising.
The launch of the lite service will be subject to the completion of the acquisition of Time Warner, which includes Warner Bros, Turner and HBO.
AT&T sees the potential to increase video advertising revenues based on targeted advertising. It says this could command rates of $30-$35 per thousand, compared to around $7-$8 for traditional television advertising.
Since its acquisition of DIRECTV, AT&T has promoted it in favour of its own U-verse telco television offering. In two years, AT&T U-verse has lost 1.6 million subscribers. Over the same period, DIRECTV initially gained 0.9 million subscribers, but has lost around 0.75 million subscribers over the last four quarters, including 188,000 in the first quarter of 2018, ending up with a similar number as it had two years previously.
The DIRECTV NOW online service has meanwhile gained 1.42 million subscribers since launch, adding 336,000 in the first quarter of 2018. It now ranks ninth among services in the United States in the informitv Multiscreen Index, behind Sling TV from DISH Network.
AT&T clearly sees the future in online services, not least because they complement its fixed and wireless internet services, for which it can charge higher monthly subscriptions.