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The pay-TV industry had a terrible quarter, shedding over one million traditional subscribers in Q3.
This could lead to some major strategy shifts from both traditional and digital TV players, and AT&T has already hinted at some of its plans.
Analysts at UBS expect AT&T to launch a new digital TV service and reposition DirecTV Now as a low-cost skinny bundle.
This means some channels, particularly those of Viacom, are in danger of being cut from DirecTV Now as AT&T focuses on profitability.

After a brutal quarter for traditional pay-TV, which saw historic subscriber losses, TV networks are looking around nervously for which distributors can pick up the slack.

But the word from AT&T isn’t encouraging.

In a note distributed Monday, analysts at UBS took a close look at what AT&T management’s recent comments indicate about the future of its TV business.

“AT&T has indicated it is shifting focus from subscriber growth to profitability and is reevaluating its programming lineups to offer skinnier bundles,” UBS wrote. AT&T launched its digital TV package, DirecTV Now, in late 2016, and has tolerated bad margins in favor of growth. The service now has almost 2 million subscribers.

But AT&T’s sentiment has changed recently, and its goal is now to “stabilize EBITDA trends in the Entertainment Group,” according to UBS.

“AT&T’s Entertainment Group is struggling,” the UBS analysts explained. “The segment includes all of its residential businesses including the local ILEC (providing voice, video and data services) as well as DirecTV. EBITDA in the segment is down 17% YTD.”

To return the segment to profitability, AT&T needs to cut costs, and a good place to do it is with DirecTV Now.

UBS expects AT&T to launch a new DirecTV digital TV service, delivered through a branded streaming device, which will be positioned as its “premium” offering and keep a large channel lineup similar to a traditional cable or satellite package.

“This service is expected to more closely mirror the satellite product and enable the company to take better advantage of addressable advertising while avoiding the cost of a satellite installation,” UBS wrote.

In this process, UBS expects the DirecTV Now to be “re-positioned” as a skinny bundle of channels, allowing DirecTV to keep the price point the same, but cut channels out of the package and get to profitability that way.

That means some channels, which get paid carriage fees by AT&T for every package they are included in, will feel the pain as they …read more

Source:: Business Insider

      

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Wall Street’s predicting a big shakeup for AT&T’s DirecTV after pay TV’s worst quarter on record

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