AT&T lost 886,000 premium television subscribers in the United States in the second quarter of 2020. The company has lost nearly six million premium television subscribers in the last two years. That includes DIRECTV, U-verse and AT&T TV subscribers. It has also managed to lose three quarters of a million AT&T TV NOW online video subscribers in two years. The long-term plan is to convert customers to “software-based entertainment” but meanwhile the loss of subscribers to legacy television platforms is considerable.
AT&T ended the first half of 2020, with 17.69 million premium television connections, including AT&T TV. That is still a fair number of subscribers, but halfway through 2018 it had 23.64 million. AT&T has lost premium television subscribers every quarter over that period, but it does not seem to concern the company.
The most recent quarterly loss of 886,000 was fewer than the loss of 897,000 the previous quarter, but more than the 778,000 it lost in the second quarter the previous year.
The average revenue per user was also down slightly, at $124.98 a month, down from $126.27 in the previous quarter, and down from a peak of $131.00 a month in the last quarter of 2019.
Online video customers, including AT&T TV NOW but excluding Watch TV, fell by 68,000 in the second quarter, compared to a loss of 138,000 the previous quarter, a loss of 219,000 in the last quarter of 2019, and a loss of 168,000 in the second quarter of 2019. By that standard it was a relative improvement, but that leaves only 720,000 paying customers, compared to a peak of 1.86 million in September 2018.
To put that in perspective, AT&T lost more premium television subscribers in the second quarter of 2020 than its total number of online television subscribers. Furthermore, it lost more premium television subscribers than the total number of television subscribers to Mediacom, the ninth largest television service provider in the United States according to the informitv Multiscreen Index.
The television and video subscriber losses include around 91,000 subscribers counted as disconnections although the company has agreed not to terminate services under the Federal Communications Commission ‘Keep Americans Connected Pledge’.
The company attributed the impact of coronavirus to be $80 million on entertainment group commercial video revenues.
AT&T still recorded video entertainment revenue of $6.98 billion for the quarter, which is not bad, but was down $0.42 billion on the previous quarter and down $1.06 billion on the same quarter the previous year.
The 13.2% reduction in revenue over the year was attributed to declines in premium and online video subscribers and the impact of COVID-19 on advertising, commercial revenues and certain fees, partially offset by higher monthly revenue from the remaining subscribers.
In Latin America, video connections, now branded Vrio, fell from 13.22 million in March to 10.66 million. This was partly due to the closure of DIRECTV operations in Venezuela due to political instability in the country and to comply with sanctions from the United States government. That resulted in a loss of around 2 million subscribers.
Overall, AT&T reported quarterly revenues of $40.95 billion, down by $4 billion year on year, with a net income of $1.28 billion, down from $3.71 billion the same quarter the prior year.
John Stankey, the chief executive of AT&T, outlined to analysts the market focus of the company in terms of three priorities.
“First, as a broadband provider, our high-speed fibre and wireless broadband networks connect the people and businesses that form the foundation for how we live and work.”
“Second, as a software-based entertainment provider, we deliver compelling entertainment experiences through HBO Max and AT&T TV, giving us the opportunity to establish meaningful relationships with the majority of U.S. households.”
“And third, the fantastic stories we tell and share in our platforms drive direct customer engagement and insights and create emotional attachments that can drive long-lasting customer loyalty across our product set.”
The description of a “software-based entertainment provider” is notable. He said: “Our software-based entertainment business has performed well. AT&T TV subscriber growth in its first full quarter was better than we expected, and it’s our highest-performing video product on customer satisfaction, double the level of our legacy TV services.”
AT&T TV, launched nationally in March 2020, using Android TV-based set-top boxes rented to subscribers. It may be doing well, but AT&T did not break out any subscriber numbers.
The company did provide an update on HBO Max, saying it finished the quarter with 36.3 million subscribers to HBO Max and HBO in the United States, up from 34.6 million at the end of 2019. That is an increase of 1.7 million that might be attributed to HBO Max, which launched on 27 May 2020. One month after launch, HBO Max had about 3 million retail subscribers, and 4.1 million subscribers had activated their Max account. Of those, more than 1 million were wholesale subscribers through AT&T.
So, what is the long-term future for the former DIRECTV satellite operation that AT&T acquired in July 2015 in a transaction valued at $67 billion?
The chief executive of AT&T is clear: “We didn’t necessarily make that move because we love satellite as a technology to deliver premium entertainment-based video content. We like the customer base.”
“It was an opportunity to move that customer base into the right technology platforms moving forward, and that’s clearly where we’re investing and what we’re doing right now, which is building those software platforms that can deliver either live or on-demand entertainment-based content and have that relationship with the customer, use the data and the analytics we pull from that and, hopefully, bridge off other services that those platforms can ultimately deliver. And I don’t necessarily view satellite technology as the place that’s necessary to make that happen.”