AT&T lost 946,000 TV subscribers in Q2 2019, a loss that the company attributed to price increases, competition, and other factors.
AT&T reported a net loss of 778,000 subscribers in the “Premium TV” category, which includes its DirecTV satellite and U-verse wireline TV services. AT&T attributed this loss to “an increase in customers rolling off promotional discounts, competition, and lower gross adds due to a focus on the long-term value customer base.”
AT&T also lost 168,000 subscribers of DirecTV Now, an online service with linear channels that’s similar to traditional satellite and cable TV. AT&T said the DirecTV Now customer loss was “due to higher prices and less promotional activity,” meaning that customers have balked at price increases and a refusal to extend discounts.
The Premium TV loss brought AT&T down to 21.6 million customers in that category, while the DirecTV Now loss brought that service down to 1.3 million customers. Including both, AT&T’s total number of video subscribers dropped from 25.4 million in Q2 2018 to 22.9 million in Q2 2019.
The loss of 946,000 TV subscribers easily outstripped last quarter’s AT&T net loss of 627,000 subscribers. “AT&T said it expects a similar level of video losses to continue in the current quarter,” according to Reuters.
AT&T’s quarterly video revenue fell 1.7% year over year, dropping to $8 billion.
Losses follow DirecTV and Time Warner buys
AT&T made a huge bet on video in recent years, buying DirecTV in 2015 and Time Warner Inc. in 2018.
When the Department of Justice tried to stop the merger with Time Warner, AT&T told a judge in a May 2018 court filing that the merger “will enable the merged company to reduce prices.” Instead, AT&T raised prices for DirecTV Now multiple times. DirecTV Now currently offers two plans that cost $50 or $70 a month, and the service charges extra for premium networks. AT&T also raised prices for its DirecTV satellite and U-verse TV services in January while simultaneously making it more expensive for customers to cancel TV or Internet service.
AT&T’s TV losses were much higher than Comcast’s, which lost 209,000 residential video customers in the quarter to bring that company’s total down to 20.6 million.
AT&T is facing a class-action complaint accusing it of lying to investors in order to hide the failure of its DirecTV Now streaming TV service. AT&T told investors that DirecTV Now was succeeding even as its subscriber base fell due to price increases and the discontinuance of promotional discounts, the lawsuit alleges.
AT&T is trying to prop up its streaming business with a new service called HBO Max, which will debut in spring 2020. AT&T is taking some Time Warner shows off Netflix in order to give exclusives to HBO Max.
AT&T also lost 34,000 residential broadband subscribers this past quarter, lowering the total to 14.4 million. The losses came from slower-speed broadband services, and they were offset by AT&T raising its fiber subscriber base from 3.1 million to 3.4 million. IP broadband revenue rose 6.5% year over year, hitting $2.1 billion in Q2 2019, “due to the continued shift of subscribers to higher-speed services, including AT&T Fiber, which was partially offset by declines in slower speed subscribers,” AT&T said.
The AT&T Entertainment Group, which includes video, broadband, and wireline phone service, reported $11.4 billion in quarterly revenue and $1.5 billion in operating income. Respectively, those numbers were down 1% and up 2.6% year over year.
The company’s total revenue—including its lucrative mobile business—was $35.5 billion, up 0.3% year over year. Operating income was $8.7 billion, up 3.8% year over year. The mobile business accounted for nearly half of AT&T’s revenue and two-thirds of its operating income.