Telecom and pay-TV behemoth AT&T Inc. (T - Analyst Report) is gearing up for the launch of its online streaming service over the top (OTT) DIRECTV Now by the end of 2016. By foraying into the OTT space, the company has joined the likes of Dish Network Corp. (DISH - Analyst Report) and Sony in offering OTT services such as Sling TV and Playstation Vue, respectively. The customers of DIRECTV can access the service on their mobile devices through a DIRECTV app.
Notably, AT&T has been strengthening its DIRECTV Now portfolio by entering into agreements with content providers. Recently, the company inked a deal with HBO that will enable the former to deliver Time Warner Inc. (TWX - Analyst Report) -owned HBO’s content across multiple platforms.
Benefits for AT&T
The online streaming service is gaining momentum which is evident from the growing success of companies like Netflix Inc. (NFLX - Analyst Report) , which is a leading player in this space. This has resulted in massive subscriber losses for the pay-TV operators. To put a check on customer churn, many pay-TV operators are adopting this model and AT&T is not an exception. Moreover, since AT&T operates its own wireless network, the company can price its DIRECTV Now offering by bundling wireless data packages with the OTT service. This will help draw new wireless customers. Additionally, with the advent of a streaming app, AT&T can generate revenues from mobile advertising – a fast growing industry.
The Bottom Line
AT&T’s DIRECTV Now can prove to be a major revenue driver for the company in the coming years. However, aggressive pricing related to non applicability of data caps for the DIRECTV service in wireless plans may be subjected to net neutrality scrutiny.
AT&T currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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