DirecTV Now’s Two-Stream Limit Will Hamper Its Appeal

AT&T officially took the wraps off DirecTV Now at a launch event Monday, and the internet-delivered TV service carries a notable restriction: Subscribers will be able to watch only two live streams per account at a time.

That means DirecTV Now won’t work as a real replacement for traditional pay-TV for most American households. In the U.S., consumers own an average of 2.8 TV sets per household, according to Consumer Technology Association research released in April. In addition, current pay-TV subscribers rent an average of 2.2 set-top boxes per household, per a Leichtman Research Group survey.

One reason for DirecTV Now’s two-stream limit: According to AT&T Entertainment Group CEO John Stankey, the telco doesn’t have a high degree of confidence that it can deliver a multi-stream service into the home.

“We just didn’t feel comfortable we could get three streams into the home at the level of quality customers expect,” he said.

But there are other reasons. Both AT&T and its programming partners want to minimize the risk that it will cannibalize existing, high-margin pay-TV customers by offering a more attractive price point for a similar bundle of TV channels. The two-stream limit also reduces the chance that DirecTV Now users will share their usernames and passwords with multiple friends or family members.

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In addition, because DirecTV Now accounts are capped at two streams, AT&T may be paying a lower per-sub fee for the rights to stream live TV networks online. That may go toward explaining why the telco is offering the service at price points $20-$30 less per month than pay-TV packages with comparable lineups.

Stankey declined to disclose the details of AT&T’s programming deals for DirecTV Now, but he said the service could increase the number of simultaneous streams delivered per subscriber account beyond two streams should AT&T decide to do so.

In any case, out of the gate DirecTV Now isn’t ideally geared to households with multiple members who would want to watch different TV channels. Effectively, the target customers are younger, price-sensitive consumers who have been resistant to buying higher-priced traditional cable or satellite services. AT&T estimates that some 20 million U.S. households do not have pay TV service today.

While Netflix’s most popular plan also offers just two HD streams for $9.99 per month, consumers are accustomed to watching far more live TV on multiple TV sets in the home. Netflix users watched about 117 minutes of video per day in 2015, according to RBC Capital Markets estimates, compared with 4 hours and 39 minutes of live and time-shifted TV, per Nielsen estimates for Q2 2016.

Note that when Dish Network first launched Sling TV in early 2015, the first plan (now dubbed Sling Orange) was limited to a single stream. That’s because when Disney inked its landmark deal with Dish in March 2014 for over-the-top rights, the restriction to a single stream per account was a key provision. Sling TV earlier this year launched a multistream version of the service, Sling Blue, which offers access to up to three streams per account; that bundle includes Fox Networks Group channels, but not Disney, ABC or ESPN channels.

Sony’s PlayStation Vue service, meanwhile, provides access to a maximum of five concurrent streams. However, a single PS Vue account can simultaneously stream channels on only one PS4 console and one PS3 console in the same home. In addition to PlayStation consoles, users can stream the service on up to three iOS and Android devices, Amazon Fire TV, Roku streaming devices, and Google Chromecast.

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