Markets Abuzz as Investor Calls Out AT&T’s Pay-TV Strategy, Wants It To Sell DIRECTV
AT&T’s stock saw a jump this morning after investing firm, Elliot Management, which owns $3.2 billion of AT&T stock released a letter addressed to AT&T’s board calling out the company’s performance and highlighting ways AT&T can improve their stock in the coming years. The firm was especially critical of AT&T’s purchase of DIRECTV back in 2015, blaming the telecommunication company for some of the challenges the pay TV market has faced since.
“The pay TV ecosystem has been under immense pressure since the deal closed. In fact, trends are continuing to erode, with AT&T’s premium TV subscribers in rapid decline as the industry, particularly satellite, struggles mightily. Unfortunately, it has become clear that AT&T acquired DirecTV at the absolute peak of the linear TV market.”
And now Elliot Management wants AT&T to rid itself of DIRECTV. The letter comes as no surprise as AT&T’s subsidiaries have under performed over the years. For example, AT&T reported in July that they lost 778,000 premium TV subscribers subscribers and a whopping 168,000 DIRECTV NOW subscribers, following two consecutive quarters which saw 350,000 drop in paid subscribers. The continuing losses left DIRECTV NOW with 1.34 million subscribers total, down from their peak of 1.85 million. Some have speculated that over the same time, Hulu Live TV has grown from 1 million to nearly 2.5 million subscribers.
After a rough second quarter, AT&T decided to revamp their DIRECTV service, in an attempt to get rid of their costliest of customers. They’ve started churning what they called unprofitable customers and have focused on launching their AT&T TV service. The new change, however, was yet another miss by AT&T. AT&T TV came with most of what customers hate —hidden fees, contracts, teaser pricing, channels they don’t need — with the similar bundle that you would get with a $50 Live TV Streaming Service. The service was missing a number of local channels and Regional Sports Networks, the NFL Sunday Ticket which are all available on DIRECTV.
Despite all these misses, AT&T is still reaching for a share in the streaming market. The company plans to launch their streaming service, HBO Max in April 2020. The service will be going for $14.99 per month identical to the price of HBO and HBO NOW. The service was originally expected to have multiple price tiers, but due to the unexpectedly low-price of Disney+, switched to a single-tier of $16-17. Reports say the company wants to hook subscribers at a lower price, and similar to what the did with their DIRECTV NOW service, slowly raise the price over time.