AT&T Executive on DirecTV Now's First Six Months of "Disrupting the Market"

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Brad Bentley

Brad Bentley talks about the early performance and challenges, not having a CBS Corp. licensing deal yet, featuring Mark Wahlberg in ad campaigns and that planned Time Warner deal.

Telecom giant AT&T launched the DirecTV Now streaming service six months ago, on Nov. 30, with networks from all major entertainment companies, except for CBS Corp.

The service debuted with a special introductory price offer of $35 per month for more than 100 channels, which has since expired. Subscribers now pay $60 for that package. Other price tiers provide more than 60 channels for $35 a month, 80-plus channels for $50 or 120 networks-plus for $70, which AT&T has emphasized is the broadest offer of any over-the-top service.

AT&T earlier this year reported that it ended 2016 with more than 200,000 DirecTV Now subscribers, but in its latest earnings report in late April didn't provide a customer update. Bloomberg News recently reported that the service had 328,000 subscribers at the end of January, but lost 3,000 users in February and saw no change in March ahead of a new marketing push, which includes its launch of broadcast spots with Mark Wahlberg for the first time this week.

Brad Bentley, executive vp marketing for AT&T Entertainment Group, spoke to The Hollywood Reporter about the streaming service's first half year, disrupting the industry, where talks about a licensing deal with CBS Corp. stand, why the company picked Wahlberg to market the service and what AT&T's planned $85.4 billion acquisition of Time Warner means for DirecTV Now.

You launched DirecTV Now six months ago. There were reports of early tech challenges and recent suggestions of stalling user growthHow do you feel about the service and the reaction from consumers so far? 

It's been great. What I describe to the team is that we are really only in the first inning here. Because of the nature of the platform, you get so much data around what is working and what's not, how to fine-tune it. We have had a really good response to the platform in terms of subscribers coming to it. We have learned a lot in terms of that process and experience and how to optimize that and improve satisfaction and going after the right kind of customers.

Like in any new business, you learn a lot. We have been very pleased, though, with the performance. From the subscriber standpoint, we are ahead of our targets for the quarter and for the year.

 

From the experiential standpoint, the platform continues to get better and better every day. And from a value proposition standpoint, we have really gone out and done some things that are very aggressive and attractive for consumers. We are now offering the ability to get DirecTV Now as part of our unlimited-plus [wireless] plan for only $10 [a month]. Consumers who are looking to cut the cord or looking for alternatives and still want premium content, but want greater choice and flexibility, are able to add 60-plus live channels for only $10, and it all comes with unlimited data where you don't have to worry about overages.

That's a great value prop. And on top of that, we include HBO at no additional cost [for unlimited-plus customers with or without an AT&T video product]. I think that value prop is beginning to really resonate. It's really an easy offer to make available to customers across our 4,000-plus AT&T stores nationwide.

So it's going good, with little bumps on the way like any new product. But we feel good about where we are at. We continue to optimize around the customer experience around the feedback, and we're really pleased where we are at this stage.

Anything that has particularly surprised you about subscribers' DirecTV Now usage? And what kind of customers take DirecTV Now?

I was surprised that we hit our entire fourth-quarter performance target in the first day or two. So there was this huge groundswell of demand, which is great. We are learning more and more about the importance of live television.

We have confirmed that we are getting a new customer that we don't have on our new platform today. We are getting a younger customer and customers who live in apartments where we have always under-indexed given that we were a satellite product prior. We can now give those consumers a product without the limitations that existed — such as "I can't put a satellite on my house," or "I can't sign up for a two-year commitment, because I got a 12-month lease." So I've been excited to see it validated that we are truly reaching a new consumer.

I have been excited to see their viewership behavior and am surprised that live television, particularly the news channels, still do quite well. Obviously there has been a swell of the importance of news in the fourth quarter and first quarter with all that's going on politically. But live news is still a very important piece of this audience's life, and that shows in the numbers we see every day.

Any big entertainment or other content, beyond news, that has been particularly popular among DirecTV Now users?

The headlines I'd say are that live news pops, live sports pops. On the VOD side, it's the shows you would expect people to be bingeing. They are bingeing the latest in Silicon Valley and the latest catching up on Game of Thrones as season seven comes along or they're bingeing through This Is Us.

It's been encouraging to be able to have that deep library of HBO content that people can add for only $5. You can't find HBO anywhere for less than $15, so it's an easy add-on. If you have unlimited-plus, it's included. So there is a lot of deep content, and we see a lot of usage of those video-on-demand assets.

Any insight on whether DirecTV Now has been attracting cord-cutters, cord-nevers or other people you didn't reach before? 

We knew from our data that there was a set of customers that, like I mentioned, we just weren't able to provide a solution for. Or they couldn't afford $100-plus a month. When we look at the data, that's the piece that has been really encouraging — that we are acquiring a different type of customer. 

There are subscribers that have traded down from satellite TV to this product. But as we look at their profiles, we see that they probably were not on the right product to begin with. They tend to be a one-room customer, a lower-end package, live in apartment buildings. That just validates our strategy. And when we look at the churn, we see it is not truly incremental, and they would likely churn out anyway. So we have been very pleased with this product reaching new customer segments. 

Any subscriber number update or predictions for where DirecTV Now will end its first year in terms of subscribers?

There's nothing I can share. What I'll just reiterate is that this isn't a hobby, this is something that is a core part of our proposition. We're putting the right pieces together to continue to play to win. Our goal is to be at the top there. We're excited about it, we have a great plan ahead of us and the product keeps getting better and better every day. 

  

Speaking of continued service upgrades: any progress in striking a CBS content deal?

There is no new update on that one. I can't get into the details of it other than to say we continue to have productive conversations. 

We have launched more [than 20] local stations and will be announcing in the next month or so a pretty robust lineup that we'll be offering later this year. Local channels are an important part of the viewing experience, and there's more to come on that front.  

Which DirecTV Now package has been the most popular one? 

We had a lot of data that showed that providing choice and value was important. So we knew that our [smallest] "Live a Little" package was going to get high penetration. I can't really share what [specifics]. That package is the most popular package. But I have been very pleasantly surprised that our "Go Big" package [for $60 a month for 100-plus channels] continues to do better than I expected.  

Our goal was to give customers choice and value and let them decide what was the best solution for their family. Previous pay TV providers put up a bunch of hoops where you had to do this to get that. 

Speaking of competition. Hulu and YouTube recently unveiled live TV services, adding to the existing over-the-top services. Have you seen an impact from those new competitors and how do you compete with them?

When those additional launches happen, you actually see the numbers bumped a positive way as it creates more awareness about alternative products and about cord-cutters coming back into the space and looking at their options. So at this stage, I think it's actually helped the category.

I said earlier we are just in the first inning. There are a bunch of things we have coming later in the year and next to continue to lead in this space. I think what is unique about our offering is we are the only one that can give you all your connectivity and content from one provider and at a price that can't be matched.

Our goal was to give our consumers entertainment their way, to remove barriers of complexity, contracts and hardware and do it at a price that has tremendous value. [Pay TV] has always been known as being in the category of "you get more by paying more," and consumers want more for less. I think that's what we have offered by bringing those products together. 

When you look at the competitive set in the space, they don't have the additional products and can't create the kind of experiences that we are providing. 

AT&T has featured Mark Wahlberg as a brand ambassador in its commercials. How important is Hollywood star power in marketing your services?

In our advertising, we are really trying to break through the barriers that have existed for customers in the past. We've got a new Mark Wahlberg spot starting [this] week featuring DirecTV Now with no contract and no hardware — add DirecTV Now for only $10. We will actually start putting that in our advertising [this] week.

We don't start with [a celebrity] in mind. We start with what do consumers really want in the space. And we hear loud and clear they want entertainment their way, they want entertainment and wireless on their own terms. As we put together that strategy of entertainment your way we thought about who's the best person to deliver that message. We looked to the options. What is unique about Mark is not only does he have exceptional awareness numbers and likability, but he scores really high in authenticity and trust and has played a lot of roles where he is the voice of the people. He is not your typical celebrity talking down to the people, but one of the people in the front line right there with you. So no person better to help communicate that consumers have updated their terms and conditions and that AT&T is the one to give you those.  

It's been great. We have seen really strong numbers as we evaluate the success of those campaigns, and it's been a great partnership.

What's been the biggest challenge for DirecTV Now for you so far?

I wouldn't say it's anything different than you would expect from any new platform. As you begin operating that platform, you see elements of it that you would have done slightly differently or that you tweak. What's been encouraging looking at the data every week in terms of customer satisfaction, the numbers for customers' intent to churn off the platform just go down and down every week as we continue to work through learnings.

That's why I say we are in the first inning, because no one comes out to the market on day one with a perfectly flawless system. You use the data to guide you on the things that matter to the customers and you make the appropriate adjustments. Every week all those numbers are moving in the right direction and continue to give us more confidence that we really do have that product and experience that customers are looking for. And that gives us confidence to invest more and marketing and pushing it. For us to put DirecTV Now on our national advertising [this] week is a good sign that we are in a position and feel good about where we are. 

AT&T chairman and CEO Randall Stephenson has said the company could consider chopping Game of Thrones into 20-minute episodes for mobile devices. Are you planning any new things like that and is there anything the planned Time Warner acquisition will allow you to do that you can't offer yet?

You can imagine given that I have been describing it as the first inning for us that there will be additional features and functionality and content that we have planned, some traditional, and some non-traditional. I can't go into any of the specifics, but just know that it's a fairly robust lineup and our plan is to truly differentiate our service amongst all of our competitors. I'm sure you can appreciate not wanting to tip my hand what those things are.

You can step back and look at the set of assets that AT&T has amassed. They purchased DirecTV, which I was part of. They made significant investments in and around spectrum to make sure they could offer the most robust mobile video lineup nationwide. And now with the pending Time Warner transaction, it is all part of a plan to really differentiate products and services and create unique experiences and great value for consumers. 

Your imagination can think through some of the possibilities. These are not just small bets, these are big bets, and they are with the consumer in mind to create more innovation and more choice and value. 

Some industry CEOs, such as Discovery Communications’ David Zaslav and Viacom’s Bob Bakish, have suggested cheaper and skinnier OTT bundles or packages of core entertainment channels may be attractive to consumers. Any thoughts on that and how this thinking fits in with or is different from your offers?   

You hear a lot of stuff out there, but I think consumers want two things: they want more choice, and they want more value. So we went on an approach where we have a fairly robust offering, but at a price that creates a lot of value for the consumer. 

The challenge with just skinny offerings is if you don't provide enough choice, all of a sudden you may have provided a skinnier package with a certain price point, but your skinny package is a lot different than my skinny package. At the end what people want is a fat package with a skinny price, and we did our best in trying to create that with the little package. 

We are not done and continue to look at providing other options. But our focus is on choice and value, and not necessarily the term "skinny." 

Some people have said the latest quarter's pay TV subscriber trends show that cord-cutting is accelerating. Do you see DirecTV Now playing a role here?

Consumers are already voting. They are already having to make tough decisions about abandoning pay TV because they didn't find the value. For some folks looking at three or four rooms, 4K and all the sports packages, they are getting plenty of value. But to some folks who only need one room or are on the go a lot, they had to leave pay TV because it was not a solution that really met their needs. That was happening beforehand. 

Our approach is to provide a model that does meet their needs and the demand that already existed. I think it will accelerate over time, but at the end of the day, we are going to provide both solutions. We will continue to provide the world's best premium television experience in your home. We have more than 20 million customers enjoying that product every day. And we will continue to provide options for consumers who want different alternatives. 

We are not looking to expedite it, but we are not shying away from it. We want to provide our customers as many options as possible. And we also want to provide their wireless needs. Our thought was to bring those together in a way that no one else can. 

Anything you feel DirecTV Now hasn't gotten credit for?

A lot of different people are in the market at different price points. We took this approach that is much more aggressive. It follows the line of creating choice and value for consumers. But the disruptive part is letting them have HBO at no extra cost, 60-plus live channels for only $10, unlimited connectivity. I mean, it doesn't get more valuable than that.  

I think most people missed that. We are really disrupting the market, and we are viewing the market differently. We are not viewing it as just over-the-top. We are viewing it as consumers want mobile and video, and they want it everywhere, and we have a unique ability to create a ubiquitous experience and simplify the value proposition. Our goal is to have the network you want with the content you crave.

The notion of worrying about the [gigabytes] of data is a thing of the past. There was a time when free nights and weekends was a big deal for wireless, and now everyone is on unlimited. Now it's about giving you the content you want. That's why I feel like we are positioned differently than any of the other providers out there. We are already a step ahead, and the other providers don't have the assets that we have.

We are putting them to good use, and I think that they are all pro-consumer, and more and more people are paying attention. And I think it's something worth calling out that we truly are disrupting and changing the media and telecommunications landscape.

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