Streaming Video Catching Up With Pay TV; Will Revenues Follow?
Telecom and media giant AT&T Inc. (NYSE: T) announced Tuesday morning that its DirecTV Now over-the-top streaming service has signed up more than 1 million subscribers in the first year of the program’s life. The downside is that streaming revenue has not replaced pay-TV losses on either the satellite or wired side of AT&T’s business.
AT&T has offered a variety of incentives to get customers to sign up. There have been low introductory prices and device giveaways, along with promises of new features due over the next few months. The company said it will introduce DVR in the cloud that allows subscribers to record shows and access them virtually anywhere, 4K Ultra High Definition (UHD) quality video, capacity for more than 35,000 on demand titles, individual profiles and a better user experience.
The company launched the program on November 30, 2016, and claimed 250,000 subscribers by the end of last year. By August the company had 500,000 subscribers, and by October the total had reached nearly 800,000.
Half of DirecTV Now subscribers have been lured away from competing traditional pay-TV providers and 10% have come from AT&T’s DirecTV satellite service or its U-verse wireline service. The remaining 40% are people who have never subscribed to pay TV.
That last subscriber group is vital to AT&T and other pay-TV services like Comcast, Time Warner Cable and Charter. According to research by analysts at Raymond James and cited by eMarketer, 31% of internet users polled last month say that a streaming service like Netflix or Hulu is their primary method of consuming video content. That’s up from 24% a year ago.
More important, perhaps, is the Raymond James finding that 35% of internet users still use a cable provider as the primary source of video content. Satellite providers Dish and DirecTV account for just 17% of video content consumption, while telecom wireline services nab just 10%.
Raymond James noted that over-the-top subscribers are not cutting pay-TV services altogether but are picking up so-called “skinny bundles” that provide the broadcast TV channels, some sports programming and access to premium channels.