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- The first quarter of 2019 was a rough one for the pay-TV industry, which posted its biggest declines in subscriber growth in four years, a new report by Credit Suisse estimated.
- AT&T contributed some of the biggest losses during the period at its satellite and streaming-TV businesses.
- “Mathematically, the declines are entirely due to subscribers declines at AT&T’s pay TV services,” Credit Suisse wrote.
- AT&T has said it expects its streaming-TV service, DirecTV Now, to pick up later in the year as people adjust to its recent package and promotional changes. The company also plans to introduce a cheaper alternative to its satellite-TV service in the second half of the year.
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Last quarter wasone of the worst for pay-TV subscriber losses, and AT&T may be mostly to blame, a new report by Credit Suisse suggests.
The telecom posted the heaviest subscriber losses of all the major US pay-TV companies during the period, according to Credit Suisse’s Media and Telecom Sectors report, published on Jun. 3.
AT&T’s satellite service DirecTV, streaming-TV platform DirecTV Now, and telecom-TV package U-Verse, lost an estimated 744,000 net subscribers combined during the period, which accounted for 85% of the losses posted by the major pay-TV companies during the quarter, Credit Suisse estimated. By comparison, Dish Network, which also has satellite and streaming-TV services, lost about 259,000 subscribers altogether during the quarter, according to the report.
Subscriber growth in the pay-TV industry overall shrunk 1.7% during the first quarter, which was sector’s largest year-over-year decline in the past four years.
“This is breaking the sector out of its ~1% cord-cutting pace of the past four years, into record sector subscriber declines,” the report said. “Mathematically, the declines are entirely due to subscribers declines at AT&T’s pay-TV services.”
Credit Suisse is expecting things to get worse before they get better. After the rough period, the firm raised its estimates for pay-TV subscriber losses this year. It forecasts that subscriber growth in the pay-TV industry will decline 2.5% or more year over year in each of the next three quarters.
“While it was clear during and post [first quarter of 2019] earnings that cord-cutting had accelerated,” the report said, “this final update and forecast still shows a significant negative variance from our prior estimates, and suggests 2019 will very likely post pay-TV subscriber declines substantially worse than previous years.”
AT&T, and DirecTV, in particular, are expected to remain big drivers of those declines.
AT&T’s satellite business was the hardest hit last quarter, with DirecTV losing 660,000 net subscribers, compared to the 266,000 satellite subscribers that competitor Dish lost, the report estimated. Credit Suisse expects higher losses at DirecTV and slightly smaller losses at Dish over the next two quarters.
Satellite TV is AT&T’s largest video business. But the company hasshifted its focus in the last year away from satellite TV, and toward growing its streaming-TV services, including DirecTV Now.
But that area of the business also had a disappointing quarter.
As part of that effort, AT&T pulled back on heavily discounted promotions andoverhauled its packages, introducing thinner channel lineups and higher prices in March.
DirecTV Now lost 83,000 net subscribers during the first quarter, which ended Mar. 31, according to the Credit Suisse report. It was the only major online bundle to lose subscribers during the period; Sling TV was flat with 7,000 net additions year-over-year, while Hulu’s live-TV service and YouTube TV continued to grow with 335,000 and 250,000 net additions, respectively. Credit Suisse is anticipating more losses at DirecTV Now next period, and gains in the third and fourth quarters, as people adjust to fewer promotions and higher prices.
Representatives for AT&T did not immediately comment on the report to Business Insider.
AT&T reported about 34 million video connections globally, across all of its services, in the first quarter of 2019. In the US, it’sone of the largest pay-TV providers with nearly 24 million video connections, as of March.
“I’ve said particularly on DirecTV Now, our streaming product, that we’ve put the price increases and we’ve seen the effect of that in the fourth quarter and the first quarter,” Randall Stephenson, chairman and CEO of AT&T, said during the company’sfirst quarter conference call. “Second quarter, you’ll see that moderate, and I actually believe second half of the year based on what we’re seeing in terms of uptake in the market on the new platform and the new product, and we should have a decent second half of the year on Direct Now.”
AT&T will alsointroduce a new TV service in the second half of the year that will be a “satellite replacement,” as Stephenson said on first-quarter call.
The service, which AT&T has not given a release date for, will be cheaper than a typical satellite plan, connect to broadband or fiber lines, and customers will be able to install it themselves, unlike satellite dishes. AT&T hopes the offering attract people who still want traditional TV services, but at a lower price.
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