AT&T Inc. (NYSE:T) Gears Up For Streaming TV Services

AT&T Logo (NYSE:T)

AT&T Inc. has signed a carriage deal with Starz. This effectively gives the former a stake in Lions Gate. With this, AT&T is keeping up a string of channel-carriage deals ahead of its rollout of the streaming DirecTV service, signing Starz to a new distribution deal that includes joining DirecTV Now.

Part of the deal includes AT&T taking an equity stake in Starz merger partner Lions Gate Entertainment — who, when its own definitive deal is done, will pay AT&T three annual installments of $16.67 mn in stock or cash. Lions Gate has signed a multi-year deal with the firm covering transactional video on demand, pay-per-view, and electronic sell-through. FBR’s Barton Crockett says Starz gave AT&T a “big double-digit step-down” to renew the deal in a “jarring outlier”. That’s expected to be offset for Starz by over-the-top revenues. AT&T has recently done similar deals with Discovery, Disney, NBCUniversal and Turner.

at&T (NYSE:T)

AT&T Inc. Said to Plan Web Streaming as Primary TV Platform by 2020

Bloomberg reports that the service will limit streams to two devices simultaneously. The price is said to be competitive with Sony’s PlayStation Vue service. AT&T Inc.’s online streaming TV service, DirecTV Now, will become the firm’s primary video platform in three to five years, as per people familiar with the plans. The largest U.S. pay-TV provider has been working for more than a year for this. It wants to build a video-delivery system that can carry multiple live feeds to broadband-connected homes, said the people. Such a platform would eliminate the need for a cable hookup. In fact, it would also allow avoiding satellite dishes in five years or less, the people said.

DirecTV Now is set to be introduced by the end of this year. It will try to appeal to a national audience of so-called cord-nevers. These are some 20 mn households that have no cable or satellite service. Now they will have 100-plus channels and a choice of streaming to one or two devices simultaneously. With this, the firm has put into place what it shared during the Q2 2016 Earnings Call.

“This is purely an OTT(over-the-top) product,” CEO Randall Stephenson said in New York on Wednesday. “This is no set-top box. It is not even a truck roll. This is a user pulling down an app, getting a very robust platform”. AT&T has been looking for ways to respond to online-only TV rivals like Netflix Inc. and Amazon.com Inc. These rivals have been luring AT&T’s users away with lower priced options. AT&T Inc.  acquired satellite-TV operator DirecTV for $48.5 bn last year. So far in 2016 it has lost more than 100,000 TV customers.

‘Now’ What is DirecTV Now

Initially, DirecTV Now will be aimed at budget-minded consumers, and will stream free for AT&T wireless subscribers. The price of the service has yet to be finalized. If AT&T can get customers to sign up online on their own, it will reduce customer service costs and allow the firm to offer the service at a price competitive with Sony Corp., said the people, who asked not to be identified discussing non-public information. Sony’s PlayStation Vue starts at $39.99 for 60 channels and runs as high as $54.99 for more than 100 channels. DirecTV Now will also compete directly with other web-streaming services like Dish Network Corp.’s Sling TV. The latter starts at $20 for the 28-channel base price. But it also runs as high as $40 for a 48-channel multi-screen package.

The firm said earlier this week that it had reached programming agreements with 90 percent of its content partners. That process has included conventional TV and online-streaming rights deals like the one reached on Thursday with Scripps Networks Interactive. This deal includes the Travel Channel, Food Network and the Cooking Channel, as per a statement. DirecTV Now could likely siphon subscribers away from the satellite-TV service. But the two-stream limit may not appeal to bigger-spending viewers with multiple TVs, tablets and phones. Depending on DirecTV Now’s success, AT&T could expand the service to include as many as 10 streams offering the kind of full-package that could replace conventional pay-TV. Eric Ryan, an AT&T spokesman, declined to comment to Bloomberg.

At the Q2 2016 Earnings Release, the firm said that it has added nearly 1 mn net satellite customers since July 2015. CFO John Stephens characterized its joint offerings (DirecTV service paired with AT&T Inc.  wireless) as a success. He also noted that the firm has more than 5 mn bundled customers.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.


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