While AT&T’s transitioning of its video business into a platform that streams more than 60 live broadcast and cable channels for just $35 a month isn’t necessarily being understood and lauded by every Wall Street media guru, Jefferies analysts recently sat down with executives for the wireless giant and heard their rationale.
“The company’s top strategy to mitigate cord-cutting is DirecTV Now,” wrote Jefferies analyst Scott Goldman, who presented his take after meeting with AT&T management.
“Management is focused on providing tailored offers to drive lower churn over time,” he wrote. “While DirecTV Now carries lower margins, management believes the platform could ultimately yield higher customer lifetime value when leveraging the value of collected consumer data and the potential for adding broadband and/or wireless to the mix.”
Goldman noted that AT&T’s transitioning of DirecTV Now onto a new technology platform, which will occur in the first quarter, will drive up ARPU, with customers offered premium options like 4K and cloud DVR.
AT&T added nearly 300,000 customers to its virtual MVPD service, DirecTV Now, in the third quarter. However, with the conglomerate losing almost as many video customers across its DirecTV satellite and U-verse IPTV platforms, analysts largely wrote off the company as trading dollars for nickels.
In his note, Goldman isn’t as dismissive of AT&T’s rationale for transitioning its customers to the virtual platform with the lower margins. But he admits that it’s “unclear as to when margins could begin to stabilize.”