Cord-cutters Sap AT&T's TV Business
October 12 2017 - 8:20AM
Dow Jones News
By Drew FitzGerald
AT&T Inc. kept losing video customers over the past three
months despite a wave of new subscribers using its streaming TV
service, a trend that could spell trouble for the broader
entertainment industry.
The telecom company said in a securities filing late Wednesday
that its video subscriber base declined by about 90,000 customers
in the third quarter. The decline, its third quarterly drop in a
row, came despite nearly 300,000 new accounts on its DirecTV Now
service, which streams channels over the internet.
The report means AT&T lost an even bigger number of
satellite-TV and U-verse video customers, a sign "cord-cutters"
threaten a broad array of companies that have until recently
counted on traditional TV bundles for growing profits. AT&T had
25.2 million video subscribers at the end of the second
quarter.
Cable giant Comcast Corp. last month said it also expects to
lose subscribers in the third quarter, partly because of customers
swapping cable subscriptions for more affordable online
substitutes.
The projections suggest DirecTV and its cable peers are all
"suffering from the ravages of cord-cutting," industry analyst
Craig Moffett of MoffettNathanson LLC wrote in a note to clients.
"DirecTV and Comcast are seeing and responding to the same secular
pressures. It is reasonable to expect a weak quarter for the whole
Pay TV industry."
Some of AT&T's loses came from a string of catastrophic
hurricanes, a challenge executive John Stankey mentioned last month
at a Bank of America Merrill Lynch investor conference. "Customers
who obviously lose a home make a decision to discontinue service,"
he said, and often take time to move back or resettle.
Hurricanes Harvey and Irma ruined thousands of homes in Texas
and Florida, respectively. Wireless carriers are still assessing
the full extent of the destruction Hurricane Maria left in Puerto
Rico, where most residents are still living without power three
weeks after the storm made landfall.
But natural disasters couldn't account for all of the problems
in the video business. AT&T also blamed "heightened competition
in traditional pay TV markets and over-the-top services" as well as
"stricter credit standards" for the decline.
The company didn't immediately respond to a request for
additional comment.
Many online-TV bundles like DirecTV Now and Sling TV from Dish
Network Corp. mimic the same video packages cable and satellite
providers offer but they tend to be less expensive and less
profitable for their providers.
AT&T has also attracted DirecTV Now subscribers with free
promotions and deep discounts. "Notably, almost all of them appear
to be centered on bundling, with the benefit seemingly toward
bolstering video metrics at DirecTV," Mr. Moffett said.
Write to Drew FitzGerald at andrew.fitzgerald@wsj.com
(END) Dow Jones Newswires
October 12, 2017 08:05 ET (12:05 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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