AT&T, which has agreed to acquire Time Warner for $85.4 billion, and its satellite TV arm DirecTV on Monday unveiled pricing and bundling details of the much-anticipated DirecTV Now and other streaming video offers that the telecom giants hopes will appeal to Americans as their TV viewing behavior continues to evolve.
And it did so with the help of a celebrity appearance by Reese Witherspoon.
— DIRECTV (@DIRECTV) November 28, 2016
The services, which were demoed on Monday afternoon in midtown Manhattan, will launch imminently, giving AT&T, the largest U.S. pay TV company with more than 25 million subscribers, a head start over such competitors as online video joint venture Hulu, which is planning a 2017 launch for its own live streaming service. Alphabet/Google and Apple are also believed to have been working on possible over-the-top video services.
The invitation-only event did not feature AT&T chairman and CEO Randall Stephenson, but was led by John Stankey, CEO of AT&T Entertainment Group, and colleagues. An opening video featured popular TV shows, movies and such tag lines as "Let Freedom Stream" and "The Future Is Now."
The new service that is getting most attention is DirecTV Now, which will launch later this month, with monthly prices starting at $35 for up to more than 100 live streamed TV networks, as AT&T had previously announced. DirecTV Now also offers premium add-on options.
That makes it closer to the DirecTV satellite TV service than more typical 25-channel or so skinny bundles like Dish Network's Sling TV. People at AT&T and working with the company say the telecom giant’s message has been that the appeal of skinny bundles is limited, something content company CEOs also have been saying.
All major entertainment giants, except for CBS Corp., have in recent months unveiled deals to be included in DirecTV Now -- from Walt Disney to Time Warner's Turner and HBO, NBCUniversal, Viacom to AMC Networks, Discovery Communications and, most recently, 21st Century Fox. AT&T executives said the goal was of providing the best of live and on-demand TV.
Before Monday, no specific date had been set. AT&T on Monday said DirecTV Now will be available starting on Wednesday and also detailed the specific networks that will be included in its various streaming services. Latest expectations ahead of Monday's launch event were that the $35 per-month DirecTV Now service would include live local streams of ABC and NBC in select markets.
AT&T unveiled the following packages and prices for DirecTV Now: Live a Little for $35 per month with 60-plus channels, Just Right for $50 a month for 80-plus channels, Go Big for $60 for 100-plus channels and Gotta Have It for $70 per month for 120-plus channels. "Fans of HBO and Cinemax can add these channels for just $5 each per month in addition to your base programming package," the company said.
"We're extending our entertainment portfolio for those who value premium content but also want more TV freedom suited for their lifestyle, whether watching at home or on their mobile devices. This is TV your way," said Stankey. "Our new customer-centric offers show that mobility and entertainment are better together."
Witherspoon came out as a surprise celebrity guest during the press event to share with the audience of reporters and analysts that she was thrilled to partner with AT&T and DirecTV “to bring my new production company Hello Sunshine to their customer base.” Witherspoon recently teamed with Otter Media, the joint venture of The Chernin Group and AT&T, on Hello Sunshine, which will focus on telling female-driven stories across various platforms.
Bentley also promised more AT&T originals will become available over time, including one entitled Taylor Swift Now, which a slide called “a new video experience only on AT&T” and which the executive said will have 13 chapters.
Stephenson last year mentioned that the company was looking to target the 20 million-plus U.S. homes without pay TV subscriptions, which Stankey confirmed on Monday. That means it is going after people who haven’t had access to pay TV, have cut or want to cut the cord or have no interest in signing up for linear pay TV. "This isn't the junk nobody wants. This is 100 premium channels ... the premium content you know and love to watch," Stephenson said. "This is a game changer."
Analysts say Wall Street and Hollywood companies will in 2017 spend much time analyzing the performance and impact of DirecTV Now and other planned over-the-top video services.
"Ma Bell is about to set the tone for the industry; all eyes are on the success of DirecTV Now, as well as D.C. views on zero-rating and the pending Time Warner deal," Macquarie Securities analyst Amy Yong wrote in a recent report.
"Contrary to the prevailing concern, we see minimal cannibalization risk to its linear video business," she added. "The offering targets the 20 million-25 million broadband-only homes and urban areas where DirecTV is under-indexed. Assuming a modest 5 percent take-rate, we believe [DirecTV] Now could add 1 million-plus subs in short order."
Some have wondered how DirecTV Now can make a profit for AT&T. Wall Street observers have said that the service could help the telecom giant sign up wireless subscribers from such competitors as Verizon. Data used to watch DirecTV Now on mobile devices will be free for AT&T wireless subscribers. Critics have said that could also mean that subscribers using such services as Netflix could face higher data bills than DirecTV Now users.
MoffettNathanson analysts Craig Moffett and Michael Nathanson have estimated that the programming costs for DirecTV Now alone could hit $34 per subscriber per month, which would make other financial and operational benefits key drivers of its success.
Charter Communications CEO Tom Rutledge, meanwhile, recently said that DirecTV Now offers many networks, but not all and looks like it has a profit margin built in. "I don’t think they are below price. But I also don’t think they are full packages," he said. "I don’t think all the broadcast signals are in it. This doesn't add up to the price, so I think it does have some [profit] margin."
AT&T Entertainment & Internet Services executive vp and chief marketing officer Brad Bentley said that the only things missing from DirecTV Now are CBS and Showtime, "which we are working through actively," he said.
In addition to the broad-based DirecTV Now, the company's streaming services include Fullscreen, which launched earlier this year for $5.99 per month, as well as the free, advertising-supported Freeview, which will showcase content from AT&T’s Audience Network, other networks and millennial-focused video from Otter Media, AT&T's joint venture with Peter Chernin's The Chernin Group.
Stankey on Monday called the launch of DirecTV Now as a bigger play than the launch of video service U-verse and also spoke of the importance of having struck new long-term content deals with entertainment giants over the past year at attractive financial terms. "This is the foundation" for how the company does business and launches additional products in the future, he also said. "That is just the start."
A great premium product will remain a key focus for AT&T/DirecTV, while the new services look to target "portions" of the 20 million-plus U.S. homes that are not part of the TV eco-system right now, according to Stankey. He said taking costs out of the fully digital system will allow the company to pass those on to consumers. And more features will follow over time, he said. He called it "a big game changer."
Stankey said his son, who lives and works in Washington, DC was home for Thanksgiving, played around with the service and told him "this is what I want."