AT&T Lost Nearly 1.2 Million TV Subscribers In Latest Fiscal Quarter

Tyler Hersko
·4 min read

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AT&T lost 1.16 million subscribers between its streaming and premium TV services in the company’s latest fiscal quarter. The company disclosed that it saw a net loss of 219,000 AT&T TV Now subscribers and 945,000 net subscriber losses between DirecTV and U-Verse in the company’s Q4 2019 earnings report Wednesday morning. The losses capped off a fiscal year that saw the conglomerate part ways with more than 4 million TV customers.

AT&T isn’t the only company that is struggling to retain premium TV subscribers, but the Q4 statistics worried investors and sent the company’s stock down 3.97 percent at press time.

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The company purchased DirecTV for nearly $49 billion in 2015 and offered a variety of deals to retain subscribers. The expiration of those promotions might be accelerating AT&T’s rapid loss of TV subscribers, according to Dave Heger, a senior equity analyst at Edward Jones.

“The rate of decline has been faster than what some of their competitors have seen, but some of that has been related to the rolloff of some big promotions AT&T did when it first acquired DirecTV,” Heger said in an interview. “They were aggressive with promotions in an effort to keep subscriber numbers up (and) it’s causing heavy churn if people have been on this two-year promo deal, get their bill, and see a big increase in price. I’d expect AT&T to continue losing subscribers, which is the case across the industry, but not quite the loss rate of 2019.”

Although AT&T’s television properties are rapidly shedding customers, Heger considered the company’s Q4 earnings to be slightly better than anticipated. He noted that the key parts of the business, such as AT&T’s wireless revenue, performed adequately and added that the decline in the company’s entertainment groups weren’t as bad as he expected.

Still, other experts suggested that AT&T’s declining TV subscribers were harming the overall company. Brandon Nispel, an equity research analyst at KeyBanc Capital Market, noted that AT&T’s statistics were a negative to the company stock in a Wednesday note to clients and suggested the company might be taking steps to shut down its U-Verse service.

“Premium video subscriber losses were worse than expected with AT&T losing 1.164 million customers vs. consensus of -944,000,” Nispel said in the client note. “Broadband subscribers were also well below expectations and AT&T took a $1.3 billion charge during the quarter to write off certain copper facilities, which to us suggest it is getting ready to shut down U-Verse.”

Heger also suggested that the poor performance of AT&T’s existing TV platforms could motivate the company to shutter such services. He suggested that AT&T might not actively pitch U-Verse to customers and may consider shuttering AT&T TV Now since the similarly-named AT&T TV is becoming more broadly available.

The company’s latest subscriber losses were disclosed a few months before the May launch of HBO Max, WarnerMedia’s upcoming streaming service. AT&T chief financial officer John Stephens told investors that the investments in HBO Max reduced AT&T’s revenue by 1.2 billion in Q4 due to “forgone licensing revenues.” HBO Max will exclusively stream shows such as “The Big Bang Theory” and “Friends,” which WarnerMedia previously licensed to competing TV services. Stephens said that AT&T would likely continue seeing financial pressure in the first half of the 2020 fiscal year due to the HBO Max investments.

While HBO Max is expected to generate considerable attention for AT&T when the streaming service launches in May, Heger did not have an especially optimistic outlook on the platform.

“My initial expectations are relatively low because HBO Max is coming into a competitive field of online video services,” Heger said. “Compared to Disney+, which has really identifiable content and things for families, HBO Max is an adult-oriented service and it may require a little more marketing lift on (AT&T’s) part to generate interest.”

HBO Max will exclusively stream a wide variety of old films and shows but release dates for its original series are still under wraps. It’s unclear which, if any, of them will be available at launch.

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