AT&T’s soon-to-debut Internet TV app isn’t meant to steal customers from its DirecTV satellite service or its U-verse cable TV package. The goal—at least at the start—is to woo viewers who have opted out of the traditional pay TV ecosystem.
But CEO Randall Stephenson says he won’t be disappointed if the new service is good enough to reach beyond cord-cutters and even attract some current pay TV subscribers.
“There is risk of it cannibalizing the existing product. I think that, though, is a good sign,” said Stephenson on Wednesday while speaking at the Goldman Sachs Communacopia conference in New York. “You launch products that are disruptive in the marketplace, and if you don’t see them threatening your legacy product sets, 99 times out of 100, it doesn’t go anywhere.”
None of the current Internet TV offerings, such as Sony’s Playstation Vue service, has quite taken the world by storm. People avoiding traditional cable seem more interested in free-form services like Netflix (NFLX) and Amazon’s Prime Video—which were conceived for the Internet—than services that bundle a bunch of cable channels and come across as a slightly cheaper repackaging of old-fashioned pay TV offerings. Verizon Communications has pursued the video opportunity by trying to develop a more digital-friendly service called Go90, though it also has yet to show much success.
Still, AT&T is going the traditional route and will unveil the service in the fourth quarter, Stephenson said. The primary offering will be called DirecTV Now and come with over 100 channels. A more affordable offering, called DirecTV Mobile, will combine premium video with made-for-digital content. And a free offering called DirecTV Preview will offer some shows from the other apps but with advertising.
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The main offering will be “100 plus channels at a very, very aggressive price point,” Stephenson explained on Wednesday. And for AT&T wireless subscribers, Stephenson continued, watching the service won’t count against a customer’s monthly data allowance—a somewhat controversial practice known as zero rating.
AT&T hasn’t said much previously about how much it plans to charge. Sony’s (SNE) 100-channel tier of its Playstation Vue Internet TV package costs $45 a month. Dish Network’s (DISH) Sling TV starts at $20 to $25 per month with many fewer channels and a bevy of optional add-on channel packages that cost $5 and up. And, of course, the average traditional cable TV subscriber pays over $100 a month.
All the services are hoping to get a chunk of the increasing number of people who have opted to drop cable or cut back significantly on their pay TV spending. About 20% of all households will have opted out of the pay TV ecosystem by 2018, according to eMarketer.
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AT&T’s Internet TV service has already signed up Disney (DIS), Time Warner’s (TWX) HBO and Turner Networks, and Comcast’s (CMCSA) NBC Universal. The company is using its sway as the largest provider of traditional pay TV, with some 25 million subscribers, to cut better deals. “We have been very aggressive over the last year accumulating the content rights to distribute across all platforms,” Stephenson said.
The company has completed about 90% of the content agreements it needs, but “there are a couple of key ones that we’re still working on,” Stephenson said. The CEO didn’t name names, but AT&T (T) hasn’t announced a deal with CBS, for example.
Whether the grand package will be just what the cord-cutters are looking for remains an open question.