AT&T lost 778,000 premium television subscribers in the second quarter of 2019, adding to the loss of 544,000 in the first quarter. AT&T has lost over 2.5 million video customers in 12 months. The company says it expects subscriber losses to continue and is focussing on its long-term value customer base. A new online television service, AT&T TV, is expected to begin trials in the third quarter.

AT&T reported a net loss of 778,000 premium television subscribers, taking its total to 21.60 million. It lost 168,000 DIRECTV NOW online subscribers, for a total of 1.34 million. Its total video customers numbered 22.91 million at the end of June. That is down from 25.45 million a year previously, a net loss of 2.53 million, including 2.06 million premium video subscribers.

The company ascribed the loss of premium television subscribers to an increase in customers rolling off promotional discounts, competition and lower gross adds due to a focus on the long-term value customer base. It attributed the loss of DIRECT NOW subscribers to higher prices and less promotional activity.

Average revenue per premium video subscriber rose to $117.49 a month from $112.19 a year previously. However, total video entertainment revenue fell to $8.035 billion from $8.173 billion a quarter. That is still over $8 billion a quarter.

Randall Stephenson, the chief executive of AT&T, told analysts the entertainment group grew earnings by 1.1% in the quarter.

“Later this summer, we’ll beta launch AT&T TV in a few markets,” he said. “That’s our live TV service over broadband. We have some really high expectations for this product, and we’re going to learn from the pilot, and then we’ll expand to more cities as we go through the year. IP broadband revenue growth remains strong.”

Commenting on carriage disputes which had blacked out CBS and Nexstar services on DIRECTV, he suggested they had made what he described as a “reasonable fair offer” to CBS but had heard nothing. He said that Nexstar was asking for a 50% increase in rates for broadcast channels that are available free over the air.

“We’re just not going to impose those kind of price increases on our customers,” he said. “Unlike other times where we have gone through these type of blackouts for companies who’ve pulled their signal, our customers in a world of streaming are finding other ways to access this content.”

The chief executive appears unperturbed by video customer losses. “One has to ask, how is it that subscribers can decline like this and margins expand?” he said. “It says a lot about the customers that are staying on the network, that they tend to be very high-value customers, tend to be very valuable customers as you think about where we are going as a company. And that is distributing unique content through as many distribution points as possible.”

“The DIRECTV product is going to have a really long life, and they’re going to be segments of the market for a long time, but that’s how you’ll address those segments of the market. This thin client product that were bringing to market, it literally takes the customer acquisition costs and cuts it in half.”

“AT&T TV, you should assume, this will be the workhorse over the next couple of years. And we will put our shoulder and our muscle behind AT&T TV, get a lower price point, shore up this customer base over the next couple of years.”

“So as you think about a video portfolio, DIRECTV, AT&T TV, HBO, which we’re getting more and more conviction that HBO Max is going to be meaningful, you can imagine that those are the places we’re going to put our shoulder and our muscle as we move forward. And the implications of that to profitability, we think, are pretty important.”