DirecTV Now, AT&T’s cable-replacement streaming service, has been adding users like no tomorrow. Since launching in November 2016, it’s added over 1.5 million subscribers, making it the second-biggest live-TV streaming service.
But that success comes at a cost to AT&T: Its revenue and operating income for pay TV is down massively, because the $35-a-month subscription fee that customers pay is far less lucrative than a traditional cable TV subscription. Industry sources and analysts have long said that AT&T is losing money on every subscriber thanks to high content costs, and it looks like the company is doing something about it.
Effective July 26th, AT&T will be raising the cost of the base DirecTV Now package to $40 a month, up from $35. The change affects existing customers and new accounts, according to Cordcutters. “In the 18 months since our launch, we have continued to evolve our DIRECTV NOW products to serve this new customer set and compare favorably with our competitors,” AT&T said in a statement. “To continue delivering the best possible streaming experience for both new and existing customers, we’re bringing the cost of this service in line with the market—which starts at a $40 price point.”
It’s an obvious strategy — offer people something at a low price point, get them hooked, and then bring the prices back up to sustainable levels — but the timing coming right after AT&T’s merger with Time Warner sure is suspicious. During the trial after the DoJ sued to block the merger, AT&T claimed that allowing the merger to go through would see prices fall, rather than rise, but this price hike suggests otherwise.