AT&T is changing up its DirecTV over-the-top video strategy — looking to maximize profitability over a land-grab for cord-cutters.
This week, AT&T is notifying DirecTV Now subscribers that their monthly pricing will increase by $10 per month starting with the next billing cycle in April. AT&T last raised prices across all DirecTV Now plans less than a year ago — hiking the bundles by $5 per month starting in July 2018.
In addition, the telco is stripping down DirecTV Now’s packages available to new customers to just two bundles, versus five tiers currently. The new packages are DirecTV Now Plus ($50 per month for 40-plus channels) and DirecTV Now Max ($70 per month for 50-plus channels including regional sports networks and other sports channels), both of which will include HBO.
The new DirecTV Now Plus and Max bundles do not include any networks from A+E Networks, AMC Networks, Discovery or Viacom; both include channels from AT&T-owned Turner and HBO. The telco last week announced a WarnerMedia reorg, under which TV veteran Bob Greenblatt will oversee Turner’s entertainment properties and HBO.
AT&T also this week is expected to introduce streaming versions of its DirecTV satellite TV packages (Entertainment, Choice, Xtra, Ultimate, and Optimo Mas). Meanwhile, the company also offers AT&T Watch, a bundle of some 35 live channels (omitting ESPN and other sports networks) that is free for top-tier unlimited wireless subs and priced at $15 per month for others.
Current DirecTV Now customers will see their monthly rates increase $10, while they will continue to receive the same channel lineup. Those are Live a Little (65+ channels), rising to $50/month; Just Right (85+ channels), going up to $65/month; Go Big (105+ channels), which increases to $75/month; Gotta Have It (125+ channels), going to $85/month; and Spanish-language package Todo y Más (90+ channels), increasing to $55/month.
Word of the DirecTV Now changes were first reported by Cord Cutters News over the weekend. The new plan info was posted on DirecTV Now’s site, but it’s been temporarily taken offline.
Last year AT&T, in defending itself against an antitrust challenge launched by the Justice Department to block its Time Warner takeover, had argued in a court filing that the deal “will enable the merged company to reduce prices, offer innovative video products, and compete more effectively against the increasingly powerful, vertically integrated ‘FAANG’ companies,” a reference to Facebook, Apple, Amazon, Netflix and Google. In February, a U.S. Appeals Court upheld a previous ruling approving the AT&T/Time Warner deal.
AT&T’s go-to-market changes with DirecTV Now could spur subscribers to defect to cheaper rival OTT pay-TV services, like Google’s YouTube TV and Hulu’s live TV product, BTIG Research analyst Rich Greenfield wrote in a blog post Monday.
“While the new pricing will certainly help DirecTV Now move toward gross margin profitability, it does appear to make its vMVPD [virtual multichannel video programming distributor] service far less compelling to consumers, with both of its direct competitors cheaper (YouTube TV at $40 and Hulu Live at $45),” Greenfield wrote.
In December 2018, AT&T chief Randall Stephenson telegraphed the move at an investment conference, saying DirecTV Now would be “thinning the content out” to channels that are “really relevant to customers” to keep the price tag at around $50-$60 monthly.
During Q4, DirecTV Now lost 267,000 net subscribers after the company ended virtually all promotional pricing packages — some as low as $10 per month — by the end of 2018. At the end of 2018, AT&T tallied 1.6 million DirecTV Now subscribers. Previously AT&T had about 500,000 DirecTV Now subs on promo prices, and “they are all gone or they stepped up” to a full-price plan, CFO John Stephens said on the telco’s earnings call in January.
Separately, WarnerMedia is prepping a suite of subscription VOD services, geared around original and library content from HBO, Turner and Warner Bros., targeted for a Q4 2019 launch.