Nearly 3M Subs Dropped DirecTV In 2019

Five years after AT&T spent $49 billion to buy DirecTV, the future is cloudy for satellite TV. Rapid changes in consumer behavior, along with rising competition and management missteps, have led to staggering customer defections: AT&T on Wednesday reported that its pay-TV business last year hemorrhaged 4.1 million subscribers, including an estimated 2.9 million at its biggest brand, DirecTV. In 2018, the satellite TV service lost 1.2 million customers.

The LA Times reports the exodus comes at a crucial time for the Dallas phone giant, which has been under mounting pressure to improve its performance and pivot to a digital future. Operating income for the company’s entertainment group — which includes its high-speed internet service and pay-TV brands DirecTV, U-Verse and AT&T TV Now — dropped nearly 10% to $746 million in the fourth quarter compared with a year ago.

Last fall, an activist shareholder lambasted the acquisition of El Segundo-based DirecTV, saying the deal produced “damaging results.” In 2018, just three years after AT&T acquired DirectTV, it spent $85 billion to buy Time Warner Inc., which includes HBO, CNN, TBS and the Warner Bros. film and TV studio, increasing its bet on entertainment alongside its core mobile communications business.

But as it races to keep up with Netflix and Disney, AT&T increasingly has treated the satellite business as something of a relic, akin to rabbit-ear antennas.

“They are at a crossroads,” said Steve Nason, a senior analyst at the Dallas-area research firm Parks Associates. “Consumption habits have changed dramatically since DirecTV was founded.... The moves they are taking suggest that they are putting up a ‘going out of business’ sign” at DirecTV.

It has been a dizzying fall for one of America’s premier brands.

Since AT&T took over, hundreds of workers have been cut. Software applications and other functions have been outsourced to IBM and Accenture. The company has been eager to sell smaller assets, including its regional sports networks, and has even considered abandoning its exclusive arrangement with the NFL for the popular NFL Sunday Ticket, according to knowledgeable people who requested anonymity because they’re not authorized to comment publicly. The NFL package — a signature DirecTV offering for 25 years — has become a money loser for AT&T, given the high cost of sports rights.

DirecTV, the satellite service, now has an estimated 16.3 million customers.

AT&T attributes much of its subscriber losses to the flight of those fickle subscribers. It told investors that DirecTV’s heaviest losses occurred last year, when promotional rates expired, and it has made gains in customer retention.