AT&T lost 267,000 DirecTV Now customers in its fourth quarter, the telecom giant announced Wednesday, a clear indication of the challenging economics of streaming that comes just a few months before the company's planned launch of a new batch of branded streaming services.
DirecTV Now is an internet-based streaming service, introduced in November 2016, that offers online customers bundles of channels at different price points, much like traditional cable TV packages.
The service was intended to attract price-conscious cord-cutters and perhaps persuade them to trade up to its DirecTV satellite service. It hasn’t quite worked out that way. DirecTV has also been bleeding subscribers, losing 403,000 customers in the fourth quarter and 359,000 in the third.
Craig Moffett, a telecom analyst at the independent consulting firm MoffettNathanson, voiced surprise in an investor report on Wednesday, saying “AT&T had guided to subscriber losses in Q4. But nobody expected this.” Moffett noted that Wall Street consensus was for a loss of just 19,000 subscribers. DirecTV Now currently has 1.6 million subscribers, down from 1.86 million, the company said.
DirecTV Now’s initial streaming bundle of live channels began at $35 per subscriber per month, and currently costs $40 per month for 65 channels, according to the website. But at a conference in December, AT&T Chief Executive Officer Randall Stephenson suggested a new price point of $50 to $60 per month and said the company needed to “thin the content."
Wednesday's news is a chilling reminder that big companies looking to capture cord-cutters are struggling to find profits — and few reveal their numbers. Hulu doesn’t break out its subscriber figures for a similar cable replacement service, Hulu with Live TV, nor does Google’s YouTube TV.
“Unlike pay TV, with live streaming services you can sign up and move from one package to another,” said Dan Rayburn, a streaming media analyst with Frost & Sullivan. “It’s a hard business. There are limitations. Many are missing local channels, some are only two users at a time, and with some packages you can’t get local sports teams.”
While customers were initially lured by budget-friendly plans, those rates "are going to climb,” Rayburn said. Hulu and Netflix both just increased pricing.
"People are month-to-month,” said Alan Wolk, co-founder of TVREV, a boutique research firm. “We’re going to see a lot more from virtual MVPDs (program bundles) and from the new 'Flixes.'"