Telecom and pay-TV behemoth AT&T Inc. (T - Free Report) announced the launch of its over the top (OTT) service ‘DirecTV Now’ on Nov 28. This will mark the company’s foray into the OTT space which has incumbents like Dish Network Corp. (DISH - Free Report) and Sony offering services such as Sling TV and Playstation Vue, respectively. The customers of DIRECTV will be able to access the service on their mobile devices through a DIRECTV app. The Internet-based service will be launched in more than 100 channels at a price of $35 a month. Moreover, the service will be compatible with all the streaming devices in the market.
Focus on Rich Media Content
AT&T has been gearing up for the launch through the signing of agreements with content providers. The company also reached a merger agreement with Time Warner Inc. (TWX - Free Report) that is expected to its boost media content. Thus, by strengthening its video content, AT&T can generate digital advertising revenues through its video streaming apps. Additionally, AT&T has been working on a new mobile Internet portal to support the DirecTV Now’s range of new services like video and media streaming.
What’s in it for AT&T?
The online streaming service is gaining momentum which is evident from the growing success of companies like Netflix Inc. (NFLX - Free Report) , which is a leading player in this space. This has resulted in massive subscriber losses for pay-TV operators. To put a check on customer churn, many pay-TV operators are adopting this model and AT&T is no 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 in the coming years. However, aggressive pricing related to non applicability of data caps for the service in wireless plans may be subjected to net neutrality scrutiny.
AT&T has 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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