Cord-Cutters Sap AT&T's TV Business

     

AT&T kept losing video customers over the past three months despite a wave of new subscribers using its streaming TV service, a trend that could spell trouble for the broader entertainment industry.

The telecom company said in a securities filing late Wednesday that its video subscriber base declined by about 90,000 customers in the third quarter. The decline, its third quarterly drop in a row, came despite nearly 300,000 new accounts on its DirecTV Now service, which streams channels over the internet.

The report means AT&T lost an even bigger number of satellite-TV and U-verse video customers, a sign “cord-cutters” threaten a broad array of companiesthat have until recently counted on traditional TV bundles for growing profits. AT&T had 25.2 million video subscribers at the end of the second quarter.

Cable giant Comcast Corp. last month said it also expects to lose subscribers in the third quarter, partly because of customers swapping cable subscriptions for more affordable online substitutes.

The projections suggest DirecTV and its cable peers are all “suffering from the ravages of cord-cutting,” industry analyst Craig Moffett of MoffettNathanson LLC wrote in a note to clients. “DirecTV and Comcast are seeing and responding to the same secular pressures. It is reasonable to expect a weak quarter for the whole Pay TV industry.”

Some of AT&T’s loses came from a string of catastrophic hurricanes, a challenge executive John Stankey mentioned last month at a Bank of America Merrill Lynch investor conference. “Customers who obviously lose a home make a decision to discontinue service,” he said, and often take time to move back or resettle.

Hurricanes Harvey and Irma ruined thousands of homes in Texas and Florida, respectively. Wireless carriers are still assessing the full extent of the destruction Hurricane Maria left in Puerto Rico, where most residents are still living without power three weeks after the storm made landfall.

But natural disasters couldn’t account for all of the problems in the video business. AT&T also blamed “heightened competition in traditional pay TV markets and over-the-top services” as well as “stricter credit standards” for the decline.

Many online-TV bundles like DirecTV Now and Sling TV from Dish NetworkCorp. mimic the same video packages cable and satellite providers offer but they tend to be less expensive and less profitable for their providers. AT&T has also attracted DirecTV Now subscribers with free promotions and deep discounts. “Notably, almost all of them appear to be centered on bundling, with the benefit seemingly toward bolstering video metrics at DirecTV,” Mr. Moffett said.

I think their target market is changing due to the new options that consumers have such as Hulu and SlingTV. These new services are cheaper in price yet have a lot to offer.  Hulu has much more options compared to the options that cable/ satellite give you. Hulu even provides next day episodes to be aired in their site. Therefore, they should consider modifying their product, price, place, and promotion in order to gain and maintain customers.

https://www.wsj.com/articles/cord-cutters-sap-at-ts-tv-business-1507809030