Advanced Television

Analyst: ‘Wheels falling off satellite TV’

October 12, 2017

By Colin Mann

Reacting to AT&T’s Stock Market guidance that it expects to lose 390K traditional video subscribers, netted against a gain of 300K OTT subscribers, Craig Moffett, Partner and Senior Analyst at research firm MoffettNathanson has suggested that, in addition to general cord-cutting pressures, satellite TV is particularly affected.

AT&T’s 8-K filing states: “The video net losses were driven by heightened competition in traditional pay TV markets and over-the-top services, hurricanes and our stricter credit standards.”

According to Moffett, there are four important takeaways from AT&T’s video guidance:

  • First, it should be clear that DirecTV, like all of its Cable peers, is suffering from the ravages of cord-cutting.
  • Second, it should now also be clear that the pressure Comcast acknowledged in its own video subscriber numbers was not a function of elevated competitive intensity from AT&T. DirecTV and Comcast are seeing and responding to the same secular pressures. The issue is in the acceleration in cord-cutting, and the prevalence of OTT, not each other. It is reasonable to expect a weak quarter for the whole Pay TV industry.
  • Third, it is becoming increasingly clear that the wheels are falling off of satellite TV. We would expect Dish Network’s satellite result to be similarly weak as well.
  • Fourth and finally (since it is a topic of increasingly frequent speculation), the weakness at DirecTV makes an AT&T acquisition of DISH Network all but unthinkable. Sure, the weaker the numbers get, the easier it would likely be to gain regulatory approval. But it is certainly also the case that the weaker the numbers get, the less AT&T would want more of the same.

Moffett says the weakness in AT&T’s pay-TV numbers shines a new light on the spate of aggressive promotions at AT&T. “Notably, almost all of them appear to be centred on bundling, with the benefit seemingly toward bolstering video metrics at DirecTV. With their wireless and wireline businesses both already suffering from both declining revenues and declining subscribers, it is understandable that AT&T might want to focus on stemming the erosion of their traditional video subscribers so that the third leg of their three-legged stool is not also declining. Today’s 8-K could lend credence to our hypothesis that their promotions might be an expensive attempt to stem such a decline,” he concludes.


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