DIRECTV NOW is facing a turbulent 2019 as it is looks to continue to position itself as a leading force in the streaming video and live TV market.
The turbulence is already evident as when the company announced its Q4, 2018 results earlier today, it also confirmed it has seen a significant drop in the number of DIRECTV NOW subscribers during the quarter.
According to AT&T, by the end of the fourth quarter of 2018 the streaming service had 1.6 million subscribers with the quarter-over-quarter change calculated as a loss of 267,000 subscribers. This represents the first time in a very long time that a quarter-over-quarter loss has taken place for DIRECTV NOW.
The issue is not just with the streaming service but its video division as a whole, considering the company announced 38.4 million video subscribers at the end of 2018 compared to 38.9 million by the end of 2017.
This last point is of particular concern as AT&T’s goal has always been to migrate its traditional video customers over to its streaming service. With both the streaming and overall number of customers falling quarter-over-quarter and year-over-year, respectively, it would seem that customers are moving away from AT&T’s traditional services as planned, but not towards its streaming service - as planned.
In follow up comments, AT&T put the decline down to those who were on subsidized plans no longer staying with the service once those plans came to an end.
AT&T in the past has acted in a very aggressive way when it comes to its DIRECTV NOW service. It has not only offered various deals to attract new customers by massively reducing the cost of the service, but has also pushed its wireless mobile customers towards DIRECTV NOW as a massively reduced add-on.
The same approach has also been used for HBO since AT&T acquired the popular video service through its wider Time Warner purchase.
The prices have been so low in the past that it was always known they were unsustainable and at one point DISH Network blamed a HBO blackout on AT&T’s efforts to charge DISH more for HBO in a bid to help offset the losses incurred by subsidizing HBO to its own customers.
With AT&T now looking at adjusting its pricing strategy for the likes of DIRECTV NOW, it makes sense that it would see a natural decrease considering it was in effect causing the subscriber number to artificially inflate without a sustainable model in place.
The issue of ultra-low pricing coming back to haunt the company is only likely to get worse for AT&T going forward. As the company has made no bones about confirming that price increases are coming to DIRECTV NOW.
This is at the same time as the company having to contend with an elevation in competition in the video streaming space in general. AT&T does offer the benefit of its DIRECTV NOW service coming with a wide variety of channels but that access benefit comes at a cost and might even be less varied in the future as companies move towards offering their channels through their own direct-to-consumer streaming services.
Those on the lower-tiered payment plans (that are likely going to cost more soon) will find they have plenty of alternative services to take advantage of that offer a similar experience if not the same, and in some cases, at a lower monthly asking price.
One thing AT&T will likely be banking on is its new master plan of attacking all price segments of the market. For example, AT&T not only offers DIRECTV NOW to those looking for a mainstream option, but also WatchTV for those looking for a stripped-back and far more affordable streaming solution.
AT&T also has a third streaming service en route that will focus in on WarnerMedia (formerly Time Warner) content. That service is due to arrive in late 2019.
In spite of the losses, AT&T did confirm it did gain some new subscribers to the service. Although with 65,000 of them on free trials it remains to be seen whether they will port over to paid customers when the time comes.