Will Football Win for AT&T?

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Will Football Win for AT&T?

Will AT&T’s success in entertainment video ultimately hinge on success for NFL Sunday Ticket,  the out-of-market National Football League service? Possibly, especially in the near term.

Longer term, newer formats (over the top, mobile) will develop, and it is unclear how much success in linear video will contribute, though AT&T and many others believe success in linear video will contribute to future success in http://liveeconcerts.blogspot.com /2014/09/is-there-grand-at-video-strategy.html" style="text-decoration: none;">OTT--and especially mobile--video.

Win or lose, AT&T’s likely gambit will once again prove why unique content assets are so valuable, whether that is original series produced by Netflix or Amazon Prime, or the original series efforts that have for decades been a core part of the strategy for most linear video networks.

In a business where much content is identical on every linear network, unique assets are important. And, win or lose, AT&T is banking on NFL Sunday Ticket to be a huge driver of account growth.

There are other issues, though.

Over the last two quarters, intentionally or not, AT&T has been losing U-verse video accounts while DirecTV accounts have grown.

In the second quarter of 2016, AT&T had net additions of 342,000 DirecTV subs, but net losses of 391,000 U-verse customer accounts served by the fixed network were a drag on net growth.

Some might argue AT&T has to surmount a “digital subscriber line to U-verse” problem it has faced in its consumer Internet access business. AT&T lost 110,000 Internet accounts in the second quarter of 2016, adding 54,000 IP broadband (U-verse) customers, but losing 164,000 DSL (all-copper network) subs.

In other words, as AT&T moves existing customers from one platform to another, it has a zero net gain. Some amount of DirecTV “growth” will have a net zero gain for AT&T’s overall entertainment video business.

And, as a background matter, if AT&T is losing accounts overall. As nearly all fixed network service providers also are losing landline accounts, AT&T naturally should see additional ideo attrition pressures as it loses voice accounts.

As its primary cable TV competitors compete with triple-play offers, losing any single service is also likely to pull along a loss of one or two other services.

The other question is the extent to which AT&T actively is pushing its U-verse video customers to buy DirecTV instead of U-verse. That seems to be happening.

Early on, many thought that was the plan, all along. AT&T knows linear video is a product in the “decline” period of its product cycle, so the lower delivery cost and national footprint (except for Dish Network, no other linear video provider has a national footprint) will likely matter.

Also, as some have noted, offloading video traffic from the fixed network frees up bandwidth for Internet access, a strategic approach U.S. cable TV operators have been doing for some time, shifting to digital delivery of video (and signal compression)  in part because that frees up more bandwidth for Internet access services.

It also now appears that the U-Verse brand is going to be dropped, in favor of simple “AT&T video” or “AT&T Internet” branding.

AT&T might also be encountering an operational learning curve as well. It is not clear to what extent  equipment installs are being shifted to internal AT&T crews, rather than using the former DirecTV crews. Nor is it clear how well AT&T sales staff are selling the new product. But it would not be unusual for a learning curve to take place.

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