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DirecTV Now is set to become the biggest live-streaming TV service this year

August 9th, 2018 at 11:34 PM
DirecTv Now promo

While cord-cutting is doing an admirable job of decimating the profits of the major pay TV operators, AT&T is having some quiet success with its plan to fight back. DirecTV Now, AT&T’s signature $40-a-month streaming service that has been around for nearly two years, is still adding subscribers like crazy. According to some estimates, DirecTV Now will overhaul Sling TV to be the country’s biggest streaming service by the end of 2018.

The rate at which AT&T is adding subscribers — 342,000 in the last quarter alone — has its total sitting at 1.8 million, compared to Dish’s 2.44 million. With AT&T adding more than three subscribers for every one subscriber that Dish adds, DirecTV Now is on track to overtake Dish by the end of 2018, Multichannel notes. 

On the surface, this is encouraging news for AT&T. At a time when the rest of the industry is hemorrhaging subscribers, any kind of net subscriber addition is something that investors like to see. But it’s worth bearing in mind that replacing satellite TV subscriptions with streaming subscriptions one-for-one is still terrible news. Despite ending Q2 2018 with slightly more subscribers than it had a year earlier, total operating revenue from the Entertainment Group was down by a little over a billion dollars, from $12.7 billion to $11.7 billion. Average revenue per video user was down by around six dollars, from $121.16 to $114.92.

Those numbers are the writing on the wall for traditional pay TV operators. Even though AT&T’s number of streaming subscribers is tiny compared to its total number of video subscribers (1.8 million compared to nearly 24 million), the very small switch away from satellite and cable towards streaming is already having an impact on AT&T’s finances. DirecTV Now costs just $40 per month, compared to the $100 or more that a satellite or U-verse package costs. AT&T’s margins are reportedly tiny (or nonexistent) on streaming customers; it can add as many DirecTV Now subscribers as it wants, but if it doesn’t make a profit on them, cord-cutting will still prove to be disastrous for AT&T’s finances.

What’s worse is that DirecTV Now’s rapid subscriber growth is driven at least in part by aggressive promotions that drive those poor revenue numbers. AT&T is still offering a $10-per-month promo for the first three months of DirecTV Now, which can inflate AT&T’s subscriber growth without adding anything to the bottom line.




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