Published on January 30th, 2019 | by Brad Gibson3
With free stuff history, DirecTV Now loses 267,000 customers in holiday quarter
AT&T announced Wednesday its DirecTV Now streaming service lost 267,000 subscribers in the fourth quarter of 2018 due to fewer promotions and special deals. The disappointing but expected numbers puts DirectTV Now with 1.6 million paying customers, down from 1.86 million in September of last year.
The decline in customers for DirecTV Now is in stark contrast to the strong growth the service had seen in 2018 and indicates cord-cutting among U.S. consumers could be slowing, changing to more on-demand content from providers like Netflix and Amazon Prime Video, or customers dropping live TV entirely.
DirecTV Now added 49,000 subscribers in the third quarter of last year, 342,000 in the second quarter, and 312,000 in the first quarter.
DirecTV Now: A challenge and a re-think?
The subscriber losses for DirecTV Now in the fourth quarter put into perspective the uphill battler AT&T has to create a service that keeps customers happy and paying.
“The loss of over a quarter million subscribers is a huge challenge for AT&T,” said Brett Sappington, Senior Director of Research at Parks Associates, a market research company. “The company has placed a large bet on being successful in the online space for its video services, both financially and in reputation. A setback of this size will force them to rethink their approach.”
Sappington believes the big question for AT&T is if this drop in subscribers is a marketing or pricing setback, which is correctable, or a consumer reaction to their offering overall.
“In a high churn market that allows consumers to switch at any time, it is critically important to build, connect with, and delight a growing base of customers,” Sappington commented. “DirecTV Now may not have to start over, but all elements of the service will likely be re-examined, including content lineup, interface, features, pricing and marketing.”
Few DirecTV Now customers not surprising…even to its owners
In November of 2018, AT&T Chief Financial Officer John Stephens predicted DirecTV Now would lose customers for the foreseeable future. The service currently has no subscribers remaining on discounted promotional pricing, the company confirmed Wednesday.
“Now we’re focusing on improving profitability,” Stephens then said. “(We’ve) scaled back our (DirecTV Now) promotions and special offers. We also moved toward market pricing in the (third) quarter. We expected net (subscriber) adds to be impacted by these actions.”
AT&T CEO John Donovan reiterated Stephens’ comments back in November, saying the company made the strategic decision to rationalize promotions and special offers for DirecTV Now. “We’re taking a more tailored, data-driven approach,” he commented. “Specifically, we focused on reducing promotions for low value, high churn customers.”
Churn rate is the percentage of subscribers to a service who discontinue their subscriptions within a given time period. AT&T has never officially disclosed its churn figures for DirecTV Now.
Probably the most popular of DirecTV Now’s past promotions was a nine-month-long offering of a free 32GB Apple TV 4K to new customers who prepaid for a three-month subscription. The offer was extended more than five times since November of 2017 and terminated in September, 2018.
AT&T also raised the price of DirecTV Now last summer, increasing every service tier by $5 a month to stay “in line with the market.” This increased DirecTV Now’s ‘Live a Little’ plan to $40 per month, matching rival services like Hulu with Live TV and YouTube TV.
AT&T’s satellite TV provider, DirecTV, was also not spared subscriber losses in the quarter, losing 403,000 customers as viewers shifted to cheaper internet TV services, just not those owned by AT&T.
DirecTV Now launched in November 2016 using the Apple TV app. The service offers an entry-level package price of $40 per month for over 60 channels.