Can the newly named WarnerMedia provide the spark that AT&T needs to fix its traditional pay TV business — better known as DirecTV?
When the telecom giant reported earnings July 24, the first financial update since it closed the $85.4 billion deal for what was formerly called Time Warner, one figure that stood out was the 286,000 loss in satellite TV subscribers to 19.98 million, down from a high of 21.01 million at the end of the first quarter of 2017.
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An acceleration in cord-cutting may be blamed for five consecutive quarters of decline as consumers cancel pay TV packages for cheaper streaming options from Netflix, ?Amazon, Hulu and other services.
Over-the-top competition is also damaging Dish Network, which lost 94,000 TV subs in the first quarter, down to 10.85 million, and reports its latest numbers Aug. 3.
But the impact for AT&T was jarring: At its entertainment group, consisting mostly of DirecTV and overseen by executive John Donovan, the company posted a 9.7 percent drop in EBITDA in the second quarter.
The results drew a scathing report by MoffettNathanson analyst Craig Moffett that noted profit fell ?a whopping 16.8 percent when excluding an accounting change.
AT&T’s results came on the heels of a report from eMarketer saying that Americans are cutting their cords at a faster rate than expected, with 205.4 million pay TV subscribers in 2015 but only 169.7 million in 2018.
Bullish analysts point out that the DirecTV Now streaming service, which launched in November 2016, has helped offset the subscriber drop elsewhere. It recorded a net gain ?of 342,000 subscribers in the second quarter to 1.81 million. Likewise, Dish’s Sling TV added 94,000 subs in the first quarter ?for a total of 2.3 million.
But Moffett notes that AT&T “doesn’t make any money” on DirecTV, especially when considering generous promotions ?to draw in subscribers, calling any such customer additions “a pyrrhic victory.”
This story first appeared in the Aug. 1 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.
