AT&T TV Streaming Service Launching in February 2020

AT&T’s complicated path to online television distribution is getting a little clearer. The telecom giant plans to roll out a branded service called AT&T TV next February, according to Jeffery McElfresh, CEO of AT&T Communications.

Speaking Dec. 12 at Barclays Global Technology, Media and Telecommunications Conference in San Francisco, McElfresh said 2019 was the high point for pay-TV subscriber losses, which included DirecTV, AT&T U-verse, AT&T Watch and AT&T TV Now (formerly DirecTV Now).

AT&T Communications CEO Jeffrey McElfresh

The telecom’s pay-TV and OTT sub losses in 2019 have been staggering. AT&T lost 1.4 million AT&T TV subs in Q3, not including 195,000 OTT. The company lost 950,000 pay-TV subs in Q2, excluding 168,000 DirecTV Now subs. It lost another 544,000 subs in Q1, on top of 85,000 OTT.

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Indeed, the DirecTV Now losses, which have been troubling in light of the marketing and company push toward OTT distribution around a known satellite brand, prompted a branding change to AT&T TV Now.

“As you think about the subscriber volumes of our legacy business, we will improve the performance of that,” McElfresh said without elaborating. “But our growth agenda is on 5G [which just bowed in 10 cities], our entertainment group and on AT&T TV that will be offered nationwide.”

He said the lower capital expenditures involved in OTT distribution and technological improvements would help AT&T TV reach the finish line.

The odds are not in the telecom’s favor. Since launching in 2015 with Sling TV and Sony PlayStation Vued, the online TV business has been considered an antidote to SVOD and savior for legacy pay-TV. But consumer interest has stagnated.

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Sling remains the market leader with about 2.6 million subs. But DirecTV Now, which reached 1.5 million subs through loss-leader pricing, saw subs drop the service following a price hike. And shuttering PlayStation Vue never gained much traction beyond 500,000 subs.

“We’ll grow … in our pay-TV business with AT&T TV, coupled with a focus on our fiber broadband footprint driving incremental penetration,” McElfresh said. “And that’s how we balance out our entertainment group’s performance in 2020 and beyond.”

CFO: AT&T TV Sub Loss Peaked in Q3

When AT&T launched DirecTV Now in 2015, the telecom had big hopes the standalone online TV service would help migrate pay-TV subs to over-the-top distribution.

The media company envisioned gradually weaning consumers from the cable guy (U-verse) and satellite (DirecTV) to streaming video and competing against Sling TV, (shuttering) PlayStation Vue, YouTube TV and Hulu with Live TV, among others.

Initial consumer response to the loss-leading $34.99 monthly service was strong, quickly generating 1.8 million subscribers. Then came a $5 price hike, and DirecTV Now began hemorrhaging subs — losing 83,000 subs in Q1 after shedding 267,000 subs in Q4 2018. It lost another 168,000 DirecTV Now subs in Q2.

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AT&T had seen enough, changing the DirecTV Now brand name to AT&T TV.

Speaking Dec. 3 at the Wells Fargo Technology, Media & Telecom Conference in Las Vegas, CFO John Stephens said the worst is behind sub losses for AT&T TV. Indeed, the telecom lost a whopping 1.4 million AT&T TV subs in Q3.

“The transition we are going through is new stuff,” Stephens said. “But we are optimistic we’ve hit the peak sub losses in the third quarter.”

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Stephens said going forward sub losses should be offset by growing broadband subscribers and pending SVOD service HBO Max, which launches early next year, and will be targeted towards AT&T’s 170 million consumers, including mobile and broadband. That tally increases to 200 million when factoring in CNN and sports-themed Bleacher Report.

“We have a base that’s dramatic,” he said.

Stephens contends AT&T’s rollout of 5G wireless and high-speed fiber networks will return AT&T TV to positive growth.

“Access to stream AT&T TV is going to be more efficient,” he said.

Pay-TV Shocker: AT&T Loses More Than 1.3 Million Q3 Subs, Including 195,000 OTT

HBO Max can’t come soon enough for AT&T.

The telecom giant Oct. 28 said it lost 1.16 million pay-TV subscribers in the third quarter (ended Sept. 30). It lost an additional 195,000 AT&T TV Now (formerly DirecTV Now) subs.

The losses compared with 346,000 pay-TV subs jettisoned and 49,000 DirecTV Now subs added in the previous-year period.

The company attributed the losses to customers rolling off promotional discounts, programmer disputes and competition, as well as lower gross adds due to the continued focus on adding higher-value subscribers.

In the past 12 months AT&T has lost more than 3.2 million pay-TV subs as subscribers migrate toward alternative video services, including over-the-top. It ended the period with 20.4 million combined DirecTV and U-verse subs compared to 23.3 million a year ago.

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AT&T TV Now has lost 713,000 subs since launching Nov. 30, 2016, as a $34.99 monthly standalone online TV service. It ended the period with 1.14 million subs compared to 1.85 million last year.

Unlike other pay-TV distributors, AT&T is not supplanting linear TV subs with high-speed Internet. The company lost 83,000 broadband subs compared to a net addition of 31,000 subs last year. It lost 36,000 DSL subs, an improvement from a loss of 45,000 subs in the previous-year period.

AT&T did add 318,000 high-speed fiber subscribers.

AT&T ended the period with 14.3 million broadband subs, down from 14.4 million a year ago.

“The strategic investments we’ve made over the last several years have given us the essential elements to meet growing demand for content and connectivity,” Randall Stephenson, AT&T chairman and CEO, said in a statement.

Stephenson remain upbeat on the company’s future saying the three-year plan delivers both “substantial and consistent” financial improvements over the next three years.

“We grow revenues, [pre-tax earnings] every single year, and free cash flow is stable next year, but then grows in both of the next two years, as well,” he said. “And all of this is inclusive of our investment in HBO Max.”

HBO Max Expands Executive Team

AT&T’s pending subscription streaming service HBO Max Oct. 2 added several executives to its ranks.

The service, which is set to launch in Spring 2020, named Billy Wee SVP of original animation, and Nikki Reed VP of kids and family scripted originals.

Billy Wee

Wee comes from WarnerMedia’s TBS, where he was VP of original programming, and Reed hails from Viacom’s Nickelodeon, where she was VP of original series development.

“The kids and family space has a long history at WarnerMedia, from our legendary animation to classic motion pictures, and is now an essential part of HBO Max,” Kevin Reilly, chief content officer of HBO Max, and president of TNT, TBS and truTV, said in a statement. “We now have a top-notch team to create a slate of original content appealing to kids, tweens, young adults and the whole family.”

Nikki Reed

Separately, Max added Sarah Lyons as SVP of product experience. She previously worked for AT&T’s DirecTV unit as VP of OTT media products.

WarnerMedia executive Katie Soo, was named SVP of growth marketing, while Keith Camoosa, was named SVP of data insights and operations.

DirecTV Now’s Jess Miller was named VP of project management, while former Crunchroll executive Reid DeRamus was named senior director of business operations.

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Meanwhile, Sean Kisker, transitions to EVP and chief strategy officer for Otter Media and WarnerMedia direct-to-consumer. He will work with Josh Walker, chief strategy officer and EVP of financial planning, WarnerMedia Entertainment.

“We have gathered an all-star team of executives whose innovative contributions have directly advanced the digital media industry,” said Tony Goncalves, CEO of Otter Media.

 

AT&T CEO Defends Media Strategy, Including John Stankey as Possible Successor

Facing a boycott of sorts from an activist investor calling for senior management changes at AT&T, CEO Randall Stephenson Sept. 17 sought to outline to Wall Street why the telecom under its current management is on the right path in a rapidly changing media landscape.

Speaking Sept. 17 at Goldman Sachs 28th Annual Communacopia confab in New York, Stephenson said his decision to spend hundreds of billions of dollars acquiring satellite operator DirecTV and Time Warner was based in part on an evolving in a digital ecosystem.

“If you had asked me that question five years ago, I’d be hard-pressed to say it makes sense, in the old world,” he said. “In the new world, it makes all the sense in the world. We believe people are going to spend more and more of their day watching premium content.”

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Stephenson said AT&T has more than 170 million “customer relationships” requiring more bandwidth and connectivity to consume content, which is why he spearheaded the telecom’s $85 billion acquisition of Time Warner two years ago and the $67 billion purchase of DirecTV in 2015.

AT&T also operates 5,500 retail stores nationwide.

But it was those acquisitions, which have ballooned AT&T’s debt exponentially, while at the same time DirecTV and AT&T U-verse continue hemorrhaging subscribers (1 million this year) that led investor Elliott Management, who owns a $3.2 billion stake in AT&T, to write a letter to the board seeking changes.

Specifically, Elliott CEO Paul Singer wants Stephenson and COO John Stankey, who is also CEO of WarnerMedia, replaced.

Stephenson, who says the board will “evaluate [the letter] and see what makes sense for our shareholders,” says the content creation business is changing dramatically — moving from a linear TV distribution business model to over-the-top video.

The executive says WarnerMedia is uniquely qualified to meet the challenge with both himself and Stankey in their current positions.

“It’s a hard play to take a legacy company on legacy distribution models and make a pivot into digital distribution,” Stephenson said. “[Stankey] has done a really nice good job breaking down the [intra-company] silos. He’s got experiences that are long, wide and deep.”

“[WarnerMedia] is one of the largest-scaled TV and film production studios in the world,” he said, adding that AT&T has now become the largest distributor of HBO in the world, including 66% bigger than the premium channel’s No. 2 distributor.

Stephenson said acquiring Time Warner was due to the fact the media distribution world was changing and not growing on legacy pay-TV platforms, but rather digital platforms.

“We’ve had to reorient the business,” he said.

AT&T, Starz Ink New Carriage Agreement, Including OTT Video

AT&T and Starz, a Lionsgate company, Aug. 30 announced a new multiyear content carriage agreement. The deal secures rights for AT&T to offer the full suite of Starz and Starz Encore premium linear and HD channels, on-demand, HD on-demand to subscribers of DirecTV, AT&T TV (formerly DirecTV Now) and U-verse video platforms.

“Our customers want more choice and value in addition to compelling entertainment in our channel offerings,” Daniel York, chief content officer, AT&T Communications, said in a statement.

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“Starz is pleased to have found a mutually beneficial way to extend our relationship over the next several years to give millions of AT&T subscribers access to our acclaimed premium original content and vast library of blockbuster films,” said Jeffrey Hirsch, Chief Operating Officer of Starz. “By working together, both companies are in a position to continue to deliver great value to our shared customers.”

AT&T CEO John Donovan Retiring Oct. 1

John Donovan, CEO of AT&T’s communications segment, which includes wireless and troubled DirecTV and DirecTV Now, has announced he is retiring on Oct. 1.

AT&T has not named a successor, although media reports suggest Lori Lee, CEO of AT&T’s Latin America operations and global marketing officer, could assume Donovan’s position and become the telecom’s most senior female executive.

The 58-year-old Donovan, who has been with AT&T since 2008, helped spearhead the telecom’s $48.5 billion acquisition of satellite TV operator DirecTV in 2014.

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With that service now projected to lose about 2 million subscribers annually to alternative distribution services such as SVOD and online TV, AT&T is struggling to reshape a traditional pay-TV distribution business in the rapidly changing over-the-top video ecosystem.

And simply launching online platform DirecTV Now hasn’t been the answer. The service continues to lose subscribers who signed up for the initial loss-leading $34.99 monthly fee. That fee has been upgraded to $39.99.

Last month AT&T said it was changing the service’s name to AT&T Now. Subsidiary WarnerMedia is launching HBO Max early next year, while continuing to operate HBO Now in its current form in the interim.

Indeed, consumer choice for accessing home entertainment continues to evolve — driven in large part by the actions of Netflix, Amazon Prime Video and Disney-owned Hulu.

Craig Moffett, an analyst for research firm MoffettNathanson, lauded Donovan’s telecommunications contributions to AT&T, while tempering praise with market realities in the overall home entertainment market.

“It’s the entertainment businesses that are the problem,” Moffett told The Wall Street Journal.

Sony Downsizing PlayStation Vue?

Sony Interactive Entertainment reportedly is scaling back its involvement with local television affiliates for its branded PlayStation Vue online TV service.

Cord Cutter News, citing emails sent to affiliates from Sony, said the 4-year-old platform is looking to “deprioritize” Vue in marketing efforts across third-party websites.

Launched in 2015, the same year as Dish Network’s pioneering SlingTV, Vue has struggled to generate significant subscriber scale. The platform reportedly has about 800,000 subs — which pales in comparison to Sling’s 2.3 million.

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In fact, Vue also trails DirecTV Now, which AT&T is rebranding as “AT&T Now,” YouTube TV and Hulu with Live TV.

Vue in July upped the monthly fee of its basic plan by $5 for existing subscribers to $50 monthly, with additional programming tiers “Elite” and “Ultra” priced at $65 and $85, respectively.

A rep from Sony Interactive Entertainment wasn’t immediately available for comment.

OTT Video Consumption Skyrockets

Consumers in the United States continue to migrate toward over-the-top video distribution with streaming viewing hours in the second quarter (ended June 30) more than double (130%) from a year ago, according to new data from Conviva.

While major markets dominate overall domestic streaming consumption, Dallas, Atlanta, and Phoenix are the top 3 cities when streaming video consumption is normalized by population — ahead of tech hubs Boston, New York, and San Francisco.

The percentage of televisions connected to the Internet increased 143%, largely driven by Roku with 173% growth and 43% market share of connected TV viewing. Amazon Fire TV was up 145% in viewing with an 18% share. Apple TV was up 129% to account for 10% share.

“In 2019, streaming is coming into its own,” read the report.

Video-on-demand now accounts for 66% of all viewing hours, up from 59% last year. While mobile devices command near equal share of live versus on-demand viewing at 22.8% and 23.7%, respectively, PCs garner more share of on-demand viewing at 16.5% versus 12.6%, while connected TVs command more share of live at 56.5% versus 53.1%.

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Notably, Roku accounted for the majority of all live viewing via connected TV with 53.8%.

The report found that online TV services such as DirecTV Now, Hulu with Live TV, PlayStation Vue and Sling TV saw triple-digit growth in viewing year over year.

Market dynamics, including consolidation and the increase of hybrid business models from media companies such as NBC Universal, Apple, Disney and WarnerMedia, suggest there is even more room for growth and innovation as the lines between business models blur.

Conviva said the growth gap between studios content creators and online distributors closed even more in Q2 than previous quarters, but content aggregators continue to best other services in terms of consumption as well as quality, with viewing hours up 168% year over year.

Not to be outdone, publishers in the United States also recorded impressive growth of 137% in viewing hours year over year. The overall growth in consumption is indicative of headroom for existing streaming services alongside future entrants.

“Increased competition will also spur innovation and, as the industry saw with hybrid models with subscription and ads, more convergence in business models,” read the report.

Facebook and YouTube saw 15% more videos posted as news media led social media with the largest growth in average total video views, up 197% year-over-year. Entertainment led in growth of views per video, up 99%.
While ad-supported VOD and online TV continue to gain traction among consumers, Conviva found that ad buffering remains a “silent engagement killer” among users.

The difference between a viewer making it past the 5% mark in the video stream depends greatly on whether or not the ad flows correctly. In addition, the average streaming ad length reached 24.87 seconds despite the fact viewership drops significantly with 20+ second ads.

“The TV industry of yesterday was built on inflexible standards, antiquated measurement, and limited data. Streaming offers the vast potential of a rapidly maturing market, flexibility, targeting, and data to understand the audience like never before.”

AT&T Rebranding ‘DirecTV Now’ to ‘AT&T TV Now’

As expected, AT&T has begun informing DirecTV Now subscribers that the online TV platform is changing its brand name to AT&T TV Now.

The telecom giant, whose WarnerMedia subsidiary is in the process of rolling out the HBO Max subscription streaming video service, is attempting to rejuvenate DirecTV Now, which continues to lose subscribers who signed up for the initial loss-leading $34.99 monthly fee. That fee has been upgraded to $39.99.

“In the coming weeks, the AT&T TV app will be available for download across various app stores, and current DirecTV Now customers will see this update automatically on their devices,” AT&T said in a statement. “We’ll share more details on this rollout when it begins.”

AT&T acquired El Segundo Calif.-based satellite operator DirecTV in 2014 for $48.5 billion. It acquired Time Warner in 2016 for $84.5 billion.

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