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Can Nationwide AT&T TV Launch Reverse Video Subscriber Loss?

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After a successful pilot survey in 13 markets, AT&T Inc. T recently launched a new live TV service across the country, aiming to reverse the trend of video subscriber loss in its pay-TV bouquet. Dubbed AT&T TV, the product will aid the company to play catch-up with avant-garde media firms like Netflix, Inc. NFLX and The Walt Disney Company DIS to secure a bigger pie of the streaming service market.

Stand Out in a Crowd or Me-Too Product?

Powered by Android TV set-top box, this broadband-delivered service offers a plethora of live TV channels, 500 hours of DVR storage space and 40,000 on-demand titles that can be streamed on a mobile device anywhere in the country. This is likely to enable users to either stream their favorite content on-the-go or record innumerable shows to watch later.

In addition, AT&T TV embraces other streaming services with its compelling live TV packages, with access to more than 5,000 apps on the Google Play Store such as Netflix, Disney Plus, YouTube, Spotify, Pandora and HBO Max (when it officially launches in May 2020). The service also offers voice-enabled remote control that is integrated with Google Assistant, the AI-powered virtual assistant developed by Alphabet Inc. (GOOGL - Free Report) Google. This, is turn, is likely to provide added user benefits with a Smart Home setup in place.

Product Cannibalization?

AT&T has been ramping up its streaming services with the launch of live TV channels DirecTV Now in 2016 (presently known as AT&T TV Now), and a cheaper live-TV service WatchTV in 2018. With modest successes in both these ventures and continued subscriber loss in its DirecTV satellite TV business as users tend to shift to Internet video services, AT&T intends to focus more on video streaming content. In particular, with the launch of AT&T TV, DirecTV has now been relegated to the back-burner of AT&T’s pay-TV strategy. Moreover, it appears that the company is downplaying the cheaper alternative services as it aims to position AT&T TV as a premium streaming TV experience.

Per an August eMarketer forecast, more than one-fifth of U.S. households are expected to be cord-cutters by the end of 2021, and by 2022, the number is expected to swell to about 25%. Notably, AT&T itself lost a staggering 4.1 million video subscribers in 2019 (including nearly 1.2 million in fourth quarter alone). Evolving consumer preference for digital and subscription services over linear pay television and rental or outright purchase has compelled various media firms to alter their business models. AT&T is possibly moving in that direction, fueling industry grapevines that DirecTV is likely to be merged with DISH Network Corporation DISH.

The message seems to be loud and clear as Rasesh Patel, AT&T’s executive VP of broadband and video, observed, “Our lead TV products will be AT&T TV and HBO Max”. For the time being, DirecTV will be available but would not be actively marketed as the company focuses more on its streaming business with the writing being clearly on the wall.

Will the Ploy Work?

With attractive pricing options, stand-out features like live TV, on-demand content, and streaming apps, and promise of easy setup, price-conscious consumers are likely to opt for AT&T TV. Over the years, various market surveys have consistently showed that high prices have been the primary reason for cord cutting. As such, AT&T has priced its entry-level Entertainment plan, with about 70 cable channels plus locals at a promo rate of $49.99 per month for the first year, while the top-end Ultimate tier, with more than 170 channels, is priced at $69.99 monthly for the first year.

However, from the 13th month, the Entertainment plan is slated to go up by 86% to $93 per month while that for Ultimate tier will surge 93% to $135 per month. This, in turn, is likely to result in subscriber loss unless the company comes up with another ace in the sleeve with more product enhancements or bundled offer.

It is difficult to fathom what the future has in store for this novel business venture. What we can definitely conclude at this point of time is that AT&T TV has created quite a buzz and the industry rivals are certain to take a note of it.

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