GamingTrack.pw
Mobile

AT&T tried to buy out the streaming wars — and customers are paying for it

Over the past five years, AT&T has spent hundreds of billions of dollars preparing for the streaming wars, going on a spree of mergers and acquisitions to build a juggernaut that could stand against companies like Netflix, Apple, and Amazon. But as this week’s earnings showed, it’s not working quite the way AT&T executives had hoped.

The numbers were grim — not just for AT&T, but for conventional cable in general. According to AT&T’s fourth quarter earnings report, the company lost 4.1 million pay TV subscribers in 2019 — 1.16 million of them in the last three months of the year alone. Around 945,000 AT&T customers dropped the company’s traditional TV services last quarter, and another 219,000 customers hung up on AT&T’s creatively named AT&T TV Now internet video platform, previously named DirecTV Now.

AT&T brushed aside the company’s losses — and an afternoon stock slide — by telling investors the subscriber losses were due to an intentional reduction in overall promotions, and a renewed “focus on profitability” at the Dallas-based company.

But that’s not the whole story. AT&T spent huge amounts of money building a streaming-ready media conglomerate — from its $67 billion acquisition of DirecTV in 2015, to the hugely controversial $108.7 billion merger with Time Warner in 2018 — and now that bill is coming due. The two deals saddled AT&T with a mammoth mountain of debt, placing the telecom giant between a rock and a hard place. Even with the Trump tax cuts — estimated to have delivered AT&T a $42 billion windfall — AT&T still carried more than $151 billion in debt at the end of 2019, nearly all of it thanks to its M&A appetites.

AT&T passed that debt on to its subscribers in the form of price hikes, which in turn accelerated the company’s subscriber losses. And while those price hikes certainly helped AT&T increase its revenues (average monthly revenue for traditional TV users was $131 at the end of 2019, up from $121.76 late last year), it came at a steep reputational cost.

AT&T employees have also bore the brunt of the company’s debt-recovery efforts. The Communications Workers of America — the country’s biggest telecom union — this week complained that AT&T has laid off 37,818 jobs since the Tax Cuts and Jobs Act was passed in late 2017, the precise opposite of what the company promised while it was lobbying for the law’s passage.

AT&T’s TV ambitions weren’t helped by a year filled with numerous additional missteps, including a growing roster of so many seemingly conflicted and redundant streaming brands (HBO Go, HBO Now, AT&T Now, AT&T TV, AT&T WatchTV, AT&T U-verse, DirecTV), even AT&T support staff occasionally found themselves befuddled.

Craig Moffett, a Wall Street telecom and media sector analyst who downgraded AT&T stock to a “sell rating” last November, told The Verge he expects things will likely get worse for AT&T before they get better. And the company’s looming launch of yet another $15 per month streaming service next May — HBO Max — isn’t likely to help.

“They bought legacy assets and then tried to spin a story about how it positioned them to disrupt the status quo,” Moffett said. “It should have been obvious that that was never going to work out well.”

Moffett said AT&T’s problems are compounded by the fact that the company has a large number of programming contracts set to expire this year. The new contracts will drive up AT&T’s costs, which in turn will be passed on to consumers, accelerating its existing cord cutting worries.

AT&T had originally hoped that the huge influx of subscribers acquired from DirecTV would provide the company greater leverage in negotiations with programmers. Similarly, it hoped that acquiring Time Warner and HBO gave the company access to top-shelf original programming that could help it do battle against deep-pocketed competitors like Apple and Amazon.

But many on Wall Street (including some of AT&T’s own shareholders) felt that acquiring a traditional satellite TV company on the eve of the cord cutting revolution never entirely made sense. Neither did driving up the company’s debt load — then shoveling those costs onto the back of consumers already pissed off by the endless price hikes and abysmal customer service for which the pay TV sector is notorious.

Related posts

Facebook’s messaging apps are more important than ever as revenue growth stalls

admin

Huawei overtakes Apple in annual race to Samsung’s smartphone crown

admin

Motorola’s stylus-equipped handset appears in leaked photos

admin