Wireless and entertainment giant AT&T Inc. on Wednesday reported big subscriber declines in its TV division — even in its much-lauded DirecTV Now streaming service.
AT&T has spent billions in recent years to enter the entertainment business, buying satellite TV company DirecTV and then Time Warner, owner of HBO, CNN and the Warner Bros. movie studio.
Its video division is taking some lumps, however. In the fourth quarter, it added to its string of satellite-TV customer losses with 403,000 defections, worse than Wall Street analysts expected. DirecTV Now, the online service pitched as a cable replacement, shed 267,000 customers, the first drop since it launched in November 2016.
AT&T has been rolling back big discounts for DirecTV Now. It had 500,000 customers paying only $10 a month for the service, which hurts its profitability. Many of those customers are leaving as promotions end. In a more positive sign, the number of customers paying full price for the service grew, AT&T CEO Randall Stephenson said on a call with analysts Wednesday. DirecTV Now starts at $40 a month. It has 1.6 million streaming customers.
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“It’s been a year, year and a half of learning what the market demand was going to be and what the market engagement, customer engagement with the product was going to be,” CNBC reported. “And as we matured the product and as we came out in midyear, we just looked at the customer segment, and there was a customer segment at the low end very promotional pricing who are not engaging on the product.”
Chief Financial Officer John Stephens said the decline in subscribers was largely the result of a price promotion expiration, CNBC noted.
“Six months ago we had half a million customers on highly discounted DirecTV Now offers — offers that require the customer to pay $10 a month to pay for the service. At the end of the year, essentially none of these customers remained on those offers,” CNBC quoted Stephens as saying.
In its wireless division, the second-largest in the country after Verizon, AT&T added 134,000 cellphone customers who pay a monthly bill. Those are more lucrative than “prepaid” cellphone customers. But analysts expected more, and “churn,” or the percentage of customers who leave, rose.
Its WarnerMedia division, home to its TV networks and movie studio, got a boost from the box office of films including “A Star is Born” and “Aquaman.”
Shares of the Dallas company slumped 5 percent to $29.17 in late morning trading Wednesday.
Overall, the company posted net income of $4.86 billion, or 66 cents per share. Earnings, adjusted for one-time gains and costs, were 86 cents per share. The average estimate of 17 analysts surveyed by Zacks Investment Research was for earnings of 85 cents per share.
The telecommunications company posted revenue of $47.99 billion in the period, which fell short of Wall Street forecasts of $48.43 billion.
For the year, the company reported profit of $19.37 billion, or $2.85 per share, on revenue of $170.76 billion.