Offering insight into DirecTV Now’s eye-catching fourth-quarter customer loss of 267,000, AT&T executives said the number of customers paying full price for the platform actually grew during the three-month period, with the company ending promotional deals.
AT&T officials also said that with the movement of 500,000 DirecTV Now users off $10-a-month promos, average revenue per users (ARPU) was up $10 year over year in the fourth quarter, and $11 sequentially.
“There was a customer segment at the low end [on] very promotional pricing who are not engaging on the product,” said AT&T CEO Randall Stephens, during the company’s fourth-fourth-quarter earnings call.
“As we told you in November, there were 500,000 of those customers on the promotional pricing. And we started allowing those customers to a trade out that obviously has a significant impact on dilution. You know, the product has been dilutive in 2018,” Stephenson added.
Of course, even with customers paying the full $40 a month for DirecTV Now’s base tier, the service is still “dilutive,” to use a term highly paid decision-makers in business suits like to use in lieu of “money losing.”
AT&T believes that its recently formed advanced advertising division, Xandr, might be able to improve the revenue performance of its streaming platforms. But until that time, it doesn’t want to hemorrhage money buy giving away services like DirecTV Now.
“We don't yet have the Xandr platform stood up to really monetize meaningfully on the digital side. And we said until we get all those pieces in place, let's pull that promotional aspect out,” explained Stephenson, who also said that AT&T’s streaming ad revenue grew by 26%.
As AT&T looks to stabilize DirecTV Now’s financials, there might be further obstacles put in the path of customer growth.
In December, for instance, Stephenson said that AT&T might look at raising the base price of the DirecTV Now service to as much as $60, while “thinning out” some of the less essential networks from the bundle. He didn’t discuss that price increase during Wednesday’s call, however.