AT&T didn’t reveal Q1 sub numbers for DirecTV Now as it did in the prior quarter, but the new OTT TV service “has met our expectations,” John Stephens, AT&T’s senior EVP and chief financial officer, said Wednesday at the MoffettNathanson Media and Communications Summit.
DirecTV Now added more than 200,000 subs in its first month of service, but didn’t provide an updated number for the first quarter of this year, in which AT&T lost 233,000 total video subs. Leichtman Research Group estimates that DirecTV Now and Sling TV together added about 350,000 subs between them in Q1.
Stephens said December 2016 promos for DirecTV Now focused on devices like the Amazon Fire TV Stick and Apple TV helped to move the needle, and that the focus in Q1 was on improving the platform and ironing out the kinks.
“We wanted to see how the promotions reacted from a churn perspective,” he said, reiterating that the service is targeted to the 20 million homes that don’t have pay TV and are looking for an alternative. “We feel good with where we’re at.”
Stephens said DirecTV Now will add a cloud DVR service this year, giving it a feature that is already offered by virtual MVPDs rivals such as YouTube TV, fubo TV, Sling TV, Hulu and PlayStation Vue.
Analyst Craig Moffett also asked Stephens to assess the lifetime value of DirecTV Now subs and whether that OTT offering gives it a replacement that can provide the kind of enviable margins AT&T has with the satellite-delivered DirecTV offering.
Stephens said AT&T doesn’t view DirecTV Now as a replacement for DirecTV, but as a way to expand the pie and hit an underserved market.
"It's touching those that we wouldn’t otherwise touch,” he said, noting that AT&T has had success doing that on the wireless side with its Cricket prepaid service.
From a broader view, Stephens said AT&T is positioned as a “fully integrated network carrier” given its wireless holdings, growing fiber footprint, traditional wireline network, and satellite platform.
“We have the capability to deliver services to customers anywhere they want,” he said, later pointing out that 6 million AT&T customers are already bundling wireless with its video products.
On the wireless and mobile end of the network, Stephens said the use of millimeter wave spectrum is just one piece of AT&T’s overall strategy.
AT&T lost out to Verizon for Straight Path, which holds spectrum that could prove useful with 5G, but Stephens said AT&T’s deal for FiberTower and its mmwave spectrum will give it a “meaningful footprint” at a good price that will allow it to build out in the 39GHz region.
“We’re optimistic about millimeter wave helping,” Stephens said. “We will see how millimeter wave, as a broadband replacement to the home, works out.”