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AT&T (T) Signs Deal with Fox Networks for DirecTV Now

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U.S.telecom and pay-TV behemoth AT&T Inc. (T - Free Report) is gearing up for the launch of its over-the-top (OTT) online streaming service ‘DirecTV Now’. Recently, the telco announced agreements with Twenty-First Century Fox, Inc. (FOXA - Free Report) and Byron Allen’s Entertainment Studios Networks to expand the number of channels on DirecTV Now.

Earlier this week, AT&T announced plans to launch the OTT service on Nov 28 at a press event to be held in New York City. By foraying into the OTT space, the company has joined the likes of DISH Network Corp. (DISH - Free Report) and Sony Corporation (SNE - Free Report) in offering OTT services such as Sling TV and Playstation Vue, respectively.

DirecTV Now, priced at $35 month, will offer more than 100 channels, including live and on-demand programming as well as premium add-on options. AT&T also stated that customers will be able to access and stream the service over a wired or wireless Internet connection using a variety of connected devices and without requiring additional hardware, satellites, long-term contracts or credit checks.

Fox Networks Deal

The deal with Fox Networks is aimed at bringing the channel’s content to the DirecTV Now package. The Fox packages to be offered in AT&T’s DirecTV Now are Fox News Channel, Fox Business Network, the FX family of networks -- FX, FXX, FXM, Fox Sports 1, Fox Sports 2, the Big Ten Network, 18 Fox regional sports networks, National Geographic and Nat Geo Wild. Additionally, AT&T will be telecasting Fox Broadcasting Company programming for DirecTV Now customers nationwide via this deal. The Fox Broadcasting Company is an American commercial broadcast television network that is owned by the Fox Entertainment Group subsidiary of 21st Century Fox.

Meanwhile, AT&T’s DirecTV and U-Verse customers will continue to access Fox broadcast stations, cable and regional sports networks live and on-demand through linear TV, online, and TV Everywhere apps. DirecTV customers also will have access to 4K content from Fox's marquee sports properties, including MLB regular-season and playoff games, top college football and basketball games, Nascar races and FIFA World Cup events. Hence, DirecTV Now customers will have easy and immediate access to a wide array of Fox programming, including popular national and sports content.

Entertainment Studios Pact

Another of AT&T‘s deal in the digital media segment is with Entertainment Studios Networks. Notably, Entertainment Studios Networks is a group of seven high-definition cable networks operated by Entertainment Studios Inc. – an independent television production and distribution company founded by comedian Byron Allen in 1993. As per this deal, Entertainment Studios’ cable television networks -- COMEDY.TV and JUSTICECENTRAL.TV – will be made available on AT&T’s DirecTV Now.

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. Moreover, the telco’s OTT service was charged on anti-competitive grounds by the U.S. telecom regulator, Federal Communications Commission (FCC). The company’s recent zero-rating practices and DirecTV plans also seem to suppress competition and thus violate the FCC’s net neutrality rules.

Both AT&T and Twenty-First Century Fox currently carry 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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