AT&T may have shocked investors on Wednesday with the news that it shed more than 267,000 DirectTV Now net subscribers in one quarter, but CEO Randall Stephenson said it was expected.
The loss comes from AT&T’s plan to phase out promotional subscription pricing for DirecTV Now subscribers — meaning those $10-a-month plans were effectively canceled. Stephenson told investors that part of the decision to get rid of the promotional plans was an effort to “focus on profitability and reduced promotions,” adding that focusing on eliminating the company’s staggering debt — $166.25 billion long term — is the most important next step. DirecTV Now had approximately 500,000 subscribers on promotional plans, which Stephenson confirmed have either disappeared entirely or “stepped up” to a full-price plan.
“It’s been a year of learning what the market demands,” Stephenson said about DirecTV Now. “As we matured the project, we looked at the customer segment at the low end using promotional pricing, who were not engaging with the product. We told you in November there were 500,000 on the promotional pricing, and we started allowing those customers to attrit out. Now we have a customer base on the streaming that is growing and is highly engaged. We actually like where we are in terms of how we’re angling the streaming product.”
AT&T first acquired DirecTV in July 2015 for $67.1 billion. The acquisition was considered questionable by analysts, and a series of continuous subscriber losses within AT&T’s TV division were called a “disturbing trend,” by analysts in 2017. AT&T launched DirecTV Now in November 2016.
Although DirecTV Now isn’t the success that AT&T may have expected, the company is still betting heavily on streaming and entertainment. It’s gearing up to launch its standalone streaming service, which will rely primarily on content from Turner Media networks, HBO, and WarnerMedia films. Warner Bros., AT&T’s film division, had one of its best quarters, according to Stephenson, with films like Aquaman crossing the $1 billion mark and A Star is Born picking up eight Oscar nominations.
The streaming service is set to launch later this year, and it will compete with standalone streaming services from Disney and Apple. WarnerMedia’s streaming service will offer three different plans for subscribers that will bundle content from AT&T’s numerous entertainment divisions. The company hasn’t announced specific costs for each bundle.