×

AT&T Loses Record Number of Traditional TV Subscribers in Q2, Drops 156,000 DirecTV Satellite Customers

Telco says 491,000 DirecTV Now over-the-top subscribers signed up within seven months of launch

AT&T’s pay-TV business continues to sink, as the telco lost a record 351,000 traditional video customers in the second quarter — with the internet-delivered DirecTV Now over-the-top service failing to fully offset the losses.

Meanwhile, AT&T’s $85 billion bid to acquire Time Warner is still on track to close by the end of 2017, according to CFO John Stephens. The deal is currently being reviewed by the Department of Justice, he said on AT&T’s earnings call Tuesday.

“Our merger integration team is nearly complete,” he said. “Our goal is to hit the ground running” when the deal closes.

According to a Bloomberg report earlier this month, AT&T plans to form a media division that includes Time Warner headed by John Stankey, who currently is CEO of the telco’s entertainment group. Asked about the management structure post-merger, Stephens said chairman and CEO Randall Stephenson (who wasn’t on the call) and Time Warner chief Jeff Bewkes “are working that process out, and I’ll definitely leave that to them… Oftentimes stories are very premature.”

In Q2, historically a seasonally weak period for the pay-TV business, DirecTV’s U.S. satellite division lost 156,000 customers sequentially, dropping to 20.86 million, compared with a gain of 342,000 in the year-earlier quarter. AT&T’s U-verse lost 195,000 subs in the quarter, which was actually an improvement over the 391,000 it lost in Q2 of 2016.

AT&T’s pay-TV business experienced an unexpectedly higher amount of “involuntary churn” in Q2, according to Stephens, which refers to customers who had their accounts canceled (for example, for nonpayment). The company also is seeing TV sub losses in areas it doesn’t have fiber networks deployed, where cable competitors can bundle broadband and TV.

AT&T touted that it gained 152,000 DirecTV Now customers in Q2, after adding just 72,000 in the first quarter of 2017. Overall, it had signed up 491,000 DirecTV Now subs as of the end of June, after the OTT service launched seven months ago.

Half of DirecTV Now’s customers switched from another pay-TV service — mainly from competitors, Stephens said on the earnings call. The other half did not previously subscribe to pay-TV service at all, he said.

For the first quarter of 2017, AT&T reported a loss of 233,000 U-verse TV subs and no net change in DirecTV satellite customers. The telco did not report the number of DirecTV Now customers.

Despite the decline in TV subscribers, AT&T video entertainment revenue increased 2.1% year over year, to $9.15 billion for Q2.

AT&T’s consolidated revenue for the second quarter totaled $39.84 billion, in line with Wall Street estimates. Q2 revenue fell 1.7% versus the year-ago period, which the telco said was primarily due to declines in legacy wireline services and consumer mobility. AT&T reported earnings per diluted share of 79 cents, beating analyst consensus estimates of EPS of 74 cents.

On the wireless side, AT&T reported 2.3 million total net adds with gains in postpaid, prepaid and connected devices. Total consumer wireless subscribers in the U.S. declined 4.7% year over year, to 51.7 million. AT&T’s domestic wireless unit revenue declined 2.3%, to $17.52 billion, while operating income dropped 0.2%, to $5.33 billion.

Stephens said on the call that AT&T is seeing the fruits of the strategy of bundling TV and wireless. The company said it has 19.8 million wireless subscribers who also are TV customers, up 31% since the close of the DirecTV acquisition in 2015.

Meanwhile, AT&T said its 5G Evolution network tests are under way in Austin, Texas, and Indianapolis, and has previously announced plans to reach more than 20 markets by year-end including Atlanta, Boston, Chicago, Los Angeles, Nashville, and San Francisco. The 5G wireless technology provides twice the speeds of 4G LTE, AT&T says.

More Biz

  • Bert Salke and Jennifer Salke

    Feds Looked Into Amazon Studios Chief Jennifer Salke in College Admissions Scandal

    Federal investigators looked into Amazon Studios chief Jennifer Salke and her husband, Fox 21 Television Studios president Bert Salke, as they conducted a sprawling probe of cheating in elite college admissions, a source close to the case told Variety. It does not appear, however, that prosecutors will charge the Salkes in the case. The Salkes [...]

  • Variety Cord Cutting Placeholder Cable

    Big Blackout Looms as CBS, AT&T Go Down to Wire on Renewal Talks

    A blackout affecting CBS stations in major markets throughout the country looms as CBS and AT&T executives go down to the wire on negotiations for a retransmission consent deal covering 28 O&O stations. The sides have sparred publicly during the past few days as 11 p.m. PT Friday expiration of the previous contract approached. AT&T [...]

  • Contract Placeholder Business WGA ATA Agent

    ICM Responds to WGA Packaging Lawsuit: Claims are 'Baseless' and 'Absurd'

    ICM Partners has asked a judge to dismiss the lawsuit filed against four major talent agencies by the Writers Guild of America as part of the larger war between agencies and the guild over packaging fees on TV series and movies. The guild sued ICM, CAA, WME and UTA in California state court in April, [...]

  • New York City NYC Placeholder

    CityFM Podcast Takes a Deep Look at New York’s Music Scene (Listen)

    First among the many projects listed at the beginning of New York Music Month in June was a WNYE radio show and podcast called CityFM that promised to “explore the city’s music culture, emerging artists and trends, and upcoming events told through the lens of what’s happening around the city in Summer 2019.” And while [...]

  • Live Nation Logo. (PRNewsFoto/Live Nation)

    Live Nation Confirms Placing Tickets Directly on Secondary Market at Artists’ Request

    Representatives for Live Nation, the world’s largest live-entertainment company and owner of Ticketmaster, confirmed that it bypassed conventional channels and directly placed thousands of concert tickets on the secondary market upon artists’ request, in an article published in Billboard. In a statement shared with Variety, the company acknowledged that it has facilitated the transfer of [...]

  • Costume designer Michele Clapton

    Costume Designers Fashion a Plan to Fight for Pay Parity in Upcoming Contract Talks

    The Costume Designers Guild Local 892 is gearing up to fight for pay equity in its 2021 contract negotiations with the Alliance of Motion Picture and Television Producers, establishing a pay-equity committee to raise awareness of the scale disparity between the mostly female CDG membership and the mostly male membership of the Art Directors Guild Local [...]

More From Our Brands

Access exclusive content