DirectTV is a subdivision of the AT&T Entertainment Group and its traditional satellite service has been steadily losing customers over the past few quarters. In the last quarter of 2017 DirectTV lost a total of 147,000 customers making it the third straight quarter that the company has been in decline. It has been a fate that many cable companies have had to face in 2017. Conversely, AT&T’s cable service U-verse lost 60,000 subscribers in the fourth quarter of 2017.
Many cable services have had to innovate or be left behind and many of them have turned toward developing their own streaming services. In 2016, DirectTV teamed up with AT&T to launch their own internet pay-TV service Direct Now. Since then the service racked up 1.2 million subscribers by the end of 2017.
Traditional pay-TV customer losses are a result of stiff competition in the market. Unfortunately, AT&T fully expected to have a better year in 2017 than they did in 2016, so, when the opposite occurred, AT&T put its full force behind promoting Direct Now to account for the shortfall. This support made sense to their business strategy because customer acquisition costs for an internet service are far less than an acquisition costs for a traditional cable service.
Looking forward to 2018, AT&T plans to launch an upgraded version of its OTT service complete with cloud DVR, a third stream of Direct Now and user-interface enhancements.
When Direct Now first launched in 2016, the platform had several glitches, but they were able to recover quickly. In 2017, Direct Now earned 368,000 new subscribers, which is their best quarter to date, adding to their 787,000 existing customers.
However, on AT&Ts side of the spectrum, the business keeps running into issues. For instance, their deal to acquire Time Warner has been put on hold due to a block implemented by the Department of Justice due to the deal potentially being anti-competitive. However, AT&T expects to prevail in court and complete the merger.
At the end of 2017 in Q4 AT&T’s overall business reported $41.7 billion in revenue which is down 0.4% from 2016’s Q4 but still more than Wall Street predictions. This decline is reported to be as a result of declining sales in wireless service, legacy wireline, and U.S. video revenue.
Conversely, AT&T’s net income in Q4 of 2017 was reportedly $19 billion which is a huge jump from the reported $2.4 billion for Q4 in 2016. This is as a result of the 2017 Tax Cuts and Jobs act, which adjusted earnings to boost diluted shares to 78 cents from 66 cents in 2016 Q4.
The AT&T Entertainment Group has had a tough year. The group includes DirectTV, broadband and wireline voice and the services have suffered a decline of 3.5% in Q4 of 2017 to the tune of $12.7 billion. The company’s wireless revenue has risen by 2.5% due to equipment sales growth earning them $19.2 billion in Q4 of 2017. Of that number $8.3 billion was generated by the U.S market alone. However, that number itself has also declined by 1.7%.