AT&T’s DirecTV Now Sees Slower Subscriber Growth

AT&T Celebrates the Launch of DIRECTV NOW
NEW YORK, NY - NOVEMBER 28: EVP of Marketing at AT&T Entertainment Group Brad Bentley speaks onstage during AT&T's celebration of the Launch of DIRECTV NOW at Venue 57 on November 28, 2016 in New York City. (Photo by Dave Kotinsky/Getty Images for DirecTV)
Phot credit: Dave Kotinsky Getty Images for DirecTV

AT&T’s Internet-delivered cable TV app, DirecTV Now, saw subscriber signs ups slide after an initial boom.

The service, which provides access to more than 100 cable channels, had 328,000 subscriber in its first two months after debuting at the end of November, Bloomberg reported. But in February, DirecTV Now lost 3,000 subscribers and it showed no growth in March, the news service reported citing unnamed sources.

Fortune contacted AT&T for comment and will update this story if it responds.

DirecTV Now and several other Internet streaming services like Google’s (GOOGL) YouTube TV and Dish Network’s (DISH) Sling, seek to bring the experience of traditional cable TV to customers who don’t want the expense or the hassles of the usual cable set up, with all the in-home wiring and set top boxes. But while the legions of so-called cord cutters are growing rapidly, it remains an open question just how interested they are in having access to the dozens of channels available on cable TV. Many seem more interested in Internet services like Netflix (NFLX), Amazon’s (AMZN) Prime Video, and Hulu.

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DirecTV Now also suffered from a series of glitches and outages in its early weeks and a starting promotional price of $35 for 100 channels jumped to $60 after a few weeks (a $35 package is still available including about 60 channels).

AT&T didn’t disclose how many subscribers DirecTV Now had on its first quarter call with analysts on April 23. But CFO John Stephens said the company had purposely tried to slow subscriber growth to work out some of the kinks.

“We deliberately pulled back on marketing to give the platform time to mature and improve, and we’re seeing just that,” he said. “You should expect us to be more aggressive with DirecTV Now in the second half of the year, with additional features and content.”

And CEO Randall Stephenson made a similar point earlier this week at a JPMorgan Chase investor conference. The rapid early pace of sign ups was “much faster than we were wanting to go,” he said. “So we’ve kind of pulled back.”

Stephenson’s strategy has been to rely on bundling and combining services to attract more customers. AT&T wireless subscribers can watch DirecTV Now video on their phones without using up any of their data allowances, for example. And the company offers a $25 credit for unlimited data mobile subscribers who also buy any of its TV services, whether delivered by satellite, cable, or Internet app. Expect more bundles once AT&T closes on its $109 billion acquisition of entertainment giant Time Warner (TWX), likely before the end of the year.

Still, AT&T (T) has to strike a careful balance in promoting Internet video, as it’s also the largest pay TV provider in the country, with its DirecTV satellite offering and U-Verse wired cable service. But those ranks have been shrinking—it lost a net 233,000 pay TV subscribers in the first quarter.

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