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AT&T is winning back cord-cutters with DirecTV Now, but that doesn’t mean cable is saved

Published Jul 25th, 2018 1:30PM EDT
DirecTV Now vs U-Verse, satellite

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As we’ve documented at great lengths in the past, the cord-cutting phenomenon is accelerating rapidly, and showing no sign of slowing down any time soon. Record numbers of subscribers are cutting the cord every year, which has the cable industry scrambling to find a solution.

AT&T, which owns satellite TV provider DirecTV as well as its own pay TV service U-verse, has been the keenest of the legacy pay TV companies to embrace streaming. After launching skinny streaming service DirecTV Now in late 2016, it’s managed to work up to 1.8 million subscribers, according to numbers AT&T released in its quarterly earnings report yesterday.

In the second quarter of 2018, DirecTV Now added 342,000 subscribers. In the same time period, AT&T lost 286,000 satellite TV customers, so once the company factors in its DirecTV Now ads, it saw a net gain in TV subscribers of 80,000.

On the surface, that’s an encouraging number 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.

Chris Mills
Chris Mills News Editor

Chris Mills has been a news editor and writer for over 15 years, starting at Future Publishing, Gawker Media, and then BGR. He studied at McGill University in Quebec, Canada.