Thursday, October 12, 2017

AT&T Warns Investors of Major Looming TV Subscriber Losses -

Despite being somewhat more adaptive to changing markets than other major cable companies (see: DirecTV Now), AT&T and DirecTV have been hit notably harder by cord cutting than many other cable providers. The company had already posted record losses in TV subscribers last quarter, losing 156,000 DirecTV satellite TV customers and 195,000 IPTV (formerly known as U-Verse) customers for a net loss of 351,000 "traditional" video subscribers. Part of that is courtesy of AT&T's failure to upgrade millions of DSL customers to next-generation speeds, resulting in them shifting over to cable providers.

And AT&T is now telling investors that the company's third quarter numbers are going to be just as bad, if not worse.

In a Security and Exchange Commission filing filed this week and spotted by Cynthia Littleton at Variety, AT&T warns that the one-two punch of multiple, devastating hurricanes -- and the rise of competition in the TV space -- is going to result in a net loss of 390,000 traditional cable television subscribers. And while some of these users flocked to DirecTV Now reducing the total net loss to 90,000, those users pay significantly less money to AT&T than they used to, notably denting revenues.

"It should be clear that DirecTV, like all of its cable peers, is suffering from the ravages of cord-cutting," sector analyst Craig Moffett wrote of AT&T's warning. "It is becoming increasingly clear that the wheels are falling off satellite TV," he wrote.

That's probably not the kind of press coverage AT&T anticipated when it decided to shell out $69 billion to acquire a satellite TV provider at the dawn of the cord cutting revolution,. Or when it decided to pay another $85 billion on acquiring Time Warner -- instead of putting that money back into its fixed-line network (something that would have helped stem these defections to cable competitors).

Granted, some form of losses here are unavoidable. The traditional cable TV cash cow won't be around for ever, and the reality is that more competition means an end to refusing to compete on price. That message hasn't gotten yet through to executives at companies like Charter, who seem to think that endless rate hikes are somehow sustainable in the growing face of alternative streaming options.

AT&T deserves some credit for at least trying to adapt to the changing market with the launch of DirecTV Now, which has overcome many of its early technical headaches and has begun to slowly build momentum in the market. Still, even with adaptation traditional pay TV providers are in for a very rocky foreseeable future.

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