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AT&T Aims to Woo Customers With Slimmer Content Lineup

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Amid high subscriber churn for video-enabled services, AT&T Inc. (T - Free Report) has revamped its video content lineup at competitive prices. The strategic move is likely to increase its subscriber base and augment overall revenues as lower video packages are offset by higher digital ad revenues.

AT&T is currently offering DirecTV Now Plus package with HBO and about 40 channels for as little as $50 a month, while DirecTV Now Max package will offer more than 50 channels (including HBO) for $70 per month. In addition to live TV channels, including local options, the DirecTV Now Max package will offer an extensive on-demand library of movies and TV shows.

The revamped lineup seems to be the call of the hour as DirecTV Now reportedly lost more than 267,000 net subscribers as discounted introductory offers ended while traditional video subscribers fell 391,000. Moreover, revenues from the entertainment group, which included video services, fell from $12.6 billion to $12.2 billion in fourth-quarter 2018. The new packages will provide quality-driven video contents at competitive prices and with no annual contract.

AT&T is also restructuring its WarnerMedia business to focus more on video streaming service and fine tune its operating model with the evolving needs of customers. As part of the overhaul process of the newly minted WarnerMedia unit, AT&T aims to consolidate all its affiliates and add sales groups under a unified platform, with its units organized under entertainment networks, live programming, content production and affiliate and advertising sales. The restructured WarnerMedia Entertainment will include premium cable network HBO, Turner cable channels TNT, TBS, Tru TV and the upcoming video streaming service. WarnerMedia News and Sports will include CNN, Turner Sports, Bleacher Report and regional sports networks.

Furthermore, AT&T is reorganizing the management structure within WarnerMedia, with former NBC Entertainment chairman Robert Greenblatt now being at the helm of Entertainment unit and CNN chief Jeff Zucker overseeing the operations of News and Sports division. Kevin Tsujihara will continue to run Warner Bros Hollywood and TV studios along with the licensed consumer products business, and a newly created kids and young adult group. The affiliate and advertising sales unit will be run by Gerhard Zeiler, who earlier served as the president of Turner International

The business restructuring has led to intense speculations of massive layoffs within the company. However, AT&T seems to be keen to generate additional revenues from more video content and subsequent ads through these videos, rather than saving costs through layoffs. This, in turn, would enable the company to capture a greater market share in the digital ad business and augment its position as a media behemoth with significant presence in the telecommunication sector as well.

Despite such innovative products and services, the stock has lost 17.3% over the past year while the industry rallied 0.9%. With a focused roadmap, AT&T appears poised to turn the tables in 2019, which is likely to be a decisive year for it.

AT&T presently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry are Gogo Inc. (GOGO - Free Report) and CenturyLink, Inc. (CTL - Free Report) , carrying a Zacks Rank #2 (Buy) and Telenav, Inc. (TNAV - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Gogo beat earnings estimates in each of the trailing four quarters, the average being 34.4%.  

CenturyLink has a long-term earnings growth expectation of 5.3%. It topped estimates in each of the trailing four quarters, the average positive earnings surprise being 23.4%.

Telenav beat earnings estimates in each of the last four quarters, the average being 23.7%.

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