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DirecTV Now Generated 200,000 Subscribers in First Month

25 Jan, 2017 By: Erik Gruenwedel

DirecTV Now, AT&T’s upstart online TV monthly service, registered more than 200,000 subscribers in the fourth quarter, ended Dec. 31, 2016. Launched Nov. 30, DirecTV targets more than 20 million domestic broadband households without traditional pay-TV service.

Meanwhile, AT&T added 235,000 DirecTV subs, which was offset by a decline of 262,000 U-verse subs. The telecom has made no secret its desire to downsize U-verse in favor of satellite operator DirecTV (and DirecTV Now), which it acquired in 2015 for $48.5 billion.

In the fiscal filing, AT&T said video subscriber net additions reflected consumer migrations to DirecTV Now, which bowed with an introductory (and limited) $35 monthly fee for 100 channels. The company said it excluded DirecTV Now subs from its overall video connections and net sub additions. At the end of 2016, more than 80% of AT&T’s domestic video subscribers used DirecTV, compared with 20% for U-verse.

The company has 46 million pay-TV subs in the U.S. and Latin America.

CFO John Stephens said he was both pleased and mindful of expectations regarding initial results from DirecTV Now. He said promotions and loss-leader pricing helped drive growth.

At the same time, targeting a relatively new broadband-only consumer is a learning experience, coupled with requisite challenges involved with launching a new over-the-top video service.

“Early sub demographics tend to be more urban, younger and apartment dwellers than a typical linear TV customer,” Stephens said.

The company said video revenue in the quarter increased $600 million to $9.6 billion, followed by $1.9 billion in broadband and $1.7 billion in ancillary revenues. Operating expenses topped $11.8 billion, due in part to start-up costs associated with DirecTV Now launch.

Pre-tax entertainment earnings margin dropped to 20.8% from 22.1% during the previous-year period. AT&T added 136,000 broadband subscribers, for a total of 12.9 million.

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