AT&T To Accept Mid-Single Digital Profits On DirecTV In The Short Term
AT&T’s upcoming virtual MVPD service will be priced at around $50. This is amid news that the company will accept its mid-single digit profit margins. Jeffrey Kvall, an analyst, said they think DirecTV Now has the potential to be a game-changer and that customers won’t be locked in a contract and Hulu is planning to launch an OTT product sometime in 2017. Kvaal predicts that DirecTV Now will be priced at $55 per month, after it has officially launched. You can get coupons for Directv here to save even more plus they can even offer NFL sunday tickets to new sign ups for a limited time
John Hodulik, UBS analyst, gave his own estimate. He predicted the service, which will have over 90 channels, will be priced a bit lower. He predicts the service will cost $50 per month.
The price point is considered to be aggressive, especially since the service has quite a few channels from many conglomerates. This includes major broadcasting networks. Some of the programming deals are with heavy hitters such as CBS corp, 21st Century Fox and AMC Networks.
Craig Moffett, analyst for Moffet Nathanson, said if the company prices the service to aggressively, then cannibalization may occur. He said the company makes nice profit margins with DirecTV and offering an alternative, such as an internet-based one, will result in lower costs, which means a lower price can be justified. However, he said this doesn’t mean that AT&T can justify their pricing at very thin profit margins because they will be cutting their nose just to spite their face.
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Randall Stephenson, CEO of AT&T, spoke with investors last month and he said that the service was going to launch with thin margins, and he acknowledged that the service was starting at a very aggressive price point. He said when consumers purchase the content, then they need data in order to stream it on their mobile device, but the data is incorporated in the price of the content. He added that if consumers choose to use it on mobile devices and they use it with AT&T services, then the data cost will be implemented with the cost of the content.
The biggest cost will be programming, but the company has gotten content lined by from most of the major media firms, but there may be other costs involved. William Power, an analyst, said the company may use Akamai Technologies’ content delivery network in order to delivery Internet video to consumers’ homes. Akamai’s services may be required because the company will stream live television, which includes sports and AT&T will offer 1-2 data streams per household. Wireless customers will not have to worry about monthly data caps because DirecTV Now usage won’t count towards them.
UBS predicts that DirecTV Now may have a little over 2 million customers by 2020, but OTT competition will likely pick up. Plus, Amazon may be on their way towards developing a TV service and Apple may also have plans. With that said, people have to wait and see how the service will work. In the meantime, AT&T stock fell to 38.87 on the stock market today.