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AT&T Inc.’s new DirecTV Now service won’t turn the industry inside out, flip it on its head or break the mold, but it gets AT&T a seat at the online streaming TV table.
AT&T T, -0.15% unveiled the DirecTV Now platform, starting at $35 a month, on Monday. When it launches on Wednesday, cord-cutters and younger cord-nevers — these are AT&T’s target audience — will be presented with another way to stream live TV across devices without the need of a traditional cable subscription.
The key being, DirecTV Now is just another way to consume TV content. Some of the big players in the space are Dish Network Corp.’s DISH, +2.74% Sling TV, Sony Corp.’s SNE, -0.27% PlayStation Vue, and Hulu, which is jointly owned by Walt Disney Co. DIS, +0.71% 21st Century Fox Inc. FOX, +0.60% and Comcast Corp. CMCSA, +2.68%
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“Despite concern that AT&T would announce a seismic, industry-altering video package, the DirecTV Now offerings announced Monday are largely in-line with existing [over the top] offerings — Sling TV at the low-end and Sony’s Vue at the high-end,” wrote J.P. Morgan analysts led by Philip Cusick in a note to clients.
That being said, AT&T’s way does come with perceived benefits. Cusick wrote that AT&T’s “reasonable” pricing, coupled with the features at launch, is encouraging. However, at launch, viewers will be limited to more than two streams and will be with out DVR capability as well as CBS CBS, +0.84% and Showtime.
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AT&T is working on getting CBS on board and is expected to roll out more features with future iterations of the platform.
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There are about 20 million U.S. households without traditional cable TV. Of those, AT&T estimates 14 million to 16 million wouldn’t pass a credit check necessary to be approved for a DirecTV satellite. This is the market AT&T hopes to tap into to extend its user base and, in turn, increase revenue streams.
Cusick expects that over-the-top offerings will expand the market by two million to four million homes in the next few years, while at the same time cannibalizing three million to six million homes that pay for traditional cable today.
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So DirecTV could be more cannibalistic than additive.
“Although AT&T is clearly targeting households that do not currently pay for TV, we believe DirecTV Now will prove more attractive to existing pay-TV subscribers than non-subscribers,” wrote Pacific Crest analysts in a note to clients.
“Over the past year we estimate total pay-TV subscribers have declined less than 1%, with virtual multichannel video programming distributor services — primarily SlingTV — capturing approximately 1% share from traditional services. We expect DirecTV Now to further this trend and likely increase the pace of share gain by vMVPDs from traditional MVPDs.”
Shares of AT&T have gained more than 14% in the year to date, outperforming the S&P 500 SPX, +0.13% which is up 8% in the year.
