AT&T’s merger with Time Warner (Entertainment) is now complete, and despite repeated promises to antitrust regulators AT&T would not use consolidation as an excuse to raise rates, the company is reportedly doing exactly that on its DirecTV Now online streaming service.

According to a report by Cord Cutters News, most current subscribers will be formally notified this week their rates are going up $10 a month and new customers will be offered only two choices for DirecTV Now packages going forward — a slimmed down Plus package of 40 channels and HBO for $50 a month and a slightly larger Max package with 50 channels bundled with HBO and Cinemax for $70 a month. Both represent fewer channels for more money.

News about big changes for AT&T’s streaming services were first announced by AT&T CEO Randall Stephenson in late 2018, telling investors he planned to wring more profit out of DirecTV Now by raising rates and slimming down the number of channels in the remaining packages.

Current customers can keep their current packages indefinitely, but they will pay more starting in April. The $10 rate increase comes on the heels of a $5 rate increase in the summer of 2018, and AT&T has made it clear more price hikes are forthcoming as needed.

AT&T also told Cord Cutters News that DirecTV’s satellite service will soon debut on its own streaming platform, but it won’t come discounted or cheap:

• 65 channel DirecTV package: $93/month
• 85 channel DirecTV package: $110/month
• 105 channel DirecTV package: $124/month
• 125 channel DirecTV package: $135/month

AT&T hopes its simplified menu of offerings for DirecTV Now will prove attractive to subscribers, in part because both packages bundle either AT&T-owned HBO or HBO and Cinemax. But subscribers are also likely to notice the dramatically smaller package of cable channels, now missing AMC, Viacom and Discovery-owned networks. They are also likely to be confused by the forthcoming introduction of DirecTV satellite streaming packages, which will be marketed separately from DirecTV Now. AT&T plans to eventually mothball its satellite fleet and move DirecTV entirely to an internet streaming platform, but will take several years before switching off the last satellite.

AT&T’s DirecTV Now will slim its packages down substantially as early as tomorrow, while raising prices.

An informal FAQ:

Q. When will AT&T make these changes?

A. AT&T is expected to email current customers on or about March 12, 2019 to inform them of the $10 rate hike. At the same time, AT&T is likely to stop signing up new customers for its current DirecTV Now packages and begin offering DirecTV Now Plus or DirecTV Now Max instead. Current customers can expect to see their first bill with the new rates in April.

Q. Will current customers be grandfathered?

A. AT&T plans to tell current customers they can keep their current packages as long as they do not make changes to their account (or cancel), but effective April 12, 2019, rates will increase $10 a month for those subscribed to: Live a Little, Just Right, Go Big, and Gotta Have It.

Q. If I subscribe today to the older packages, can I avoid some of the price increases and channel changes?

A. Yes and no. If AT&T’s schedule holds, today is the last day you will be able to signup for DirecTV Now’s old packages, and you will need to make a payment today and skip the free 7-day trial to lock in these packages or you could face choosing only between Plus and Max after your trial ends. You will pay existing rates for March, but the $10 rate increase will impact you starting in April.

Q. What about the prices for premium channels?

A. If the rumors are true, and we stress these are only rumors at this point, current DirecTV Now customers that already subscribe to premium networks like HBO or Cinemax prior to March 12, will be able to avoid planned rate increases on premium networks that are also supposed to be announced as early as tomorrow. If you sign up today and subscribe to HBO and/or Cinemax, you will pay $5 a month for each going forward. Showtime and/or Starz are also available for $8 a month each going forward. The rumor claims that starting tomorrow, HBO will triple in price to $15 each, with Cinemax, Showtime and Starz supposedly increasing to $11 a month each. These new prices would only apply to grandfathered customers on older packages that want to add a premium network on or after March 12 to their existing package. AT&T would use this new pricing to incentivize customers to abandon their old package in favor of Plus or Max, which bundles HBO and HBO and Cinemax into the base package price. So if you are thinking about subscribing to a premium network and want to keep your old package, you should subscribe today and lock in the current lower price.

Q. What happens to pricing for add-on international channels?

A. If you subscribe to international channels (Vietnamese – $20/mo, Brazilian Portuguese – $25/mo, or Korean – $30/mo) before March 12, your rates stay the same. If you add these channels on or after March 12, you will likely pay more to do so. If you are considering these channels, you may save a lot in the long run subscribing today for at least a month to lock it current prices. If the rate increase does not happen, you can drop the add-on after a month.

Q. What are the biggest differences between the old and new packages?

A. You are getting fewer channels for more money from the new Plus and Max package tiers. DirecTV Now is stripping out popular cable networks from AMC, Discovery-Scripps, and Viacom from the new packages, but bundles HBO in the new Plus package and both HBO and Cinemax in the new Max package. An unofficial new channel lineup of both new packages can be found here.

Q. Why are they raising rates like this?

A. AT&T shareholders have been increasingly critical about the company’s 2015 acquisition of DirecTV. Executives sold Wall Street on the acquisition on the theory that acquiring the country’s largest cable TV programming distributor with 21+ million customers would deliver AT&T’s much smaller U-verse TV (with 4-5 million customers) dramatically better volume discounts on cable TV programming. More importantly, it would help AT&T become a powerhouse in video entertainment and cut through the red tape of getting that programming on AT&T’s mobile products. If you are a cable network’s biggest customer, it helps in negotiations seeking streaming and platform distribution rights.

Stephenson

After the merger, AT&T began de-emphasizing its U-verse brand and even started selling DirecTV satellite service to video-only AT&T customers. DirecTV Now was AT&T’s response to cord-cutting, and its promotional pricing and strong package of channels was customer and regulator friendly. At the same time AT&T was seeking to win regulator approval of its acquisition of Time Warner (Entertainment), it did not hurt to argue AT&T’s prior acquisitions had not hurt the marketplace, and may have even enhanced it, pointing to the DirecTV Now offering in the cord-cutting marketplace.

But Wall Street analysts have often argued AT&T is losing money on DirectTV Now, because the wholesale programming costs plus the distribution and marketing expenses likely exceed the prices AT&T charges. Some analysts are even questioning the wisdom of acquiring DirecTV in the first place, especially as the era of cord-cutting has taken a particularly harsh toll on DirecTV’s satellite subscriber numbers. Just a few weeks after the Justice Department abandoned further court action to block the merger of AT&T and Time Warner, Stephenson followed through on his commitment to shareholders by preparing to prune back DirecTV Now’s packages and dramatically increases prices at the same time.

“We’re talking $50 to $60,” Stephenson told investors last December. “We’ve learned this product, we think we know this market really, really well. We built a two-million subscriber base. But we were asking this DirecTV Now product to do too much work. So we’re thinning out the content and getting the price point right; getting it to where it’s profitable.”

Stephenson fully expects DirecTV Now will soon shed a large percentage of ‘low value’ customers that subscribed only because they locked in a low price or promotion, telling investors he prefers to deal with high-value customers that appreciate AT&T’s brand and quality, and won’t cancel over price increases. He does not want to deal with customers that chase promotions.

AT&T is also using the changes to reset its video portfolio of products, and the audiences each will target. Those most sensitive to price will be marketed ultra-skinny bundles like AT&T Watch, which can also be used to try and get customers to switch to AT&T wireless. Middle ground customers partially sensitive to price, but want a channel lineup that better reflects what they actually watch will be pushed towards DirecTV Now, which will be marketed as cheaper than cable and a good option for cord-cutters. DirecTV’s forthcoming satellite streaming service will be the new home for customers that gravitated towards DirecTV Now’s higher end bundles. Marketing will focus on customers that want an alternative to cable television, but won’t sacrifice their favorite cable channels just to get a lower bill. These customers will be willing to pay a higher price to have a less-jarring transition from the traditional huge cable TV package to DirecTV’s alternative.

Q. What does AT&T risk doing this?

A. Hundreds of thousands of DirecTV Now subscribers are likely to cancel service as a result of this rate increase, which will leave DirecTV Now at a higher price than many of its competitors. AT&T’s loss will likely deliver a sudden spike of new customer signups for YouTube TV and Hulu Live TV, which are the closest equivalents. Other services like Philo, Vue, and even Sling TV are also likely to grab new customers, albeit in smaller numbers.

AT&T’s biggest threat may turn out to be cable operators — especially Charter Spectrum, which has launched its own response to cable TV cord cutting. Its slimmed down and pick-your-own-channels packages could be more attractive than other streaming services, and bundle all local channels.

More specifics about those options are ‘below the fold’:

… Continue Reading

AT&T shareholders are frustrated. They are not getting the dividend payouts and shareholder value they expected after AT&T put itself $170 billion in debt last year — the highest debt load of any non-financial American corporation.

As AT&T has bet big in recent years on video-related acquisitions, including DirecTV and Time Warner (Entertainment), investors are skeptical AT&T can properly monetize its video business. Many have sold shares after criticizing company executives over the company’s strategy and high debt, driving AT&T’s market capitalization down to around $225 billion, comparable with considerably smaller Verizon Communications.

But no worries, AT&T CEO Randall Stephenson, has reassured. AT&T expects those investments to yield results this year, helped by forthcoming broad price hikes for AT&T’s consumer services.

“2019 candidly is the money year,” Stephenson said in an interview with the Wall Street Journal. “This is a year when we get everything rationalized.”

According to AT&T, customers are irrationally paying too little for AT&T’s video-related services, which include DirecTV (~19 million customers) and DirecTV Now — the two-year old streaming service that has attracted nearly two million subscribers.

Stephenson

Although DirecTV has recently been extremely aggressive about offering deep discounts to convince satellite customers to stay, AT&T plans to pull back on those discounts as two million DirecTV customers see their two-year contracts end this year. Instead of granting renewed discounts for signing another contract, AT&T plans to deliver significant rate increases.

“As those customers come due, we’ll get closer to market pricing,” AT&T’s John Donovan told investors at a November investor conference. “We’ll be respectful of our customers, but [prices] will move up.”

That may prove a difficult sell for DirecTV satellite customers, who have recently been abandoning the satellite platform in favor of cheaper streaming TV alternatives. Even with package discounts, DirecTV is the pay television industry’s most expensive provider, collecting an average of $120.36 a month for its TV packages. In contrast, Dish Networks gets an average of $103.99, Charter Spectrum earns $91.14 and Comcast, $84.50.

DirecTV defections, largely over price, have been growing at an accelerated rate, with 1.4 million customers turning their back on the satellite provider over the last two years. Analysts expect AT&T will report 300,000 more lost subscribers in the last three months alone. At that rate, AT&T will lose at least $1 billion in operating profits in 2019 from its declining satellite TV unit alone.

(Image courtesy: WSJ)

DirecTV Now customers, who already absorbed a $5 rate hike last summer, and will face even more rate increases and channel reductions in 2019. Stephenson expects DirecTV Now’s price point to be in the $50-60 range, which means many customers will likely face an average of $10 in rate hikes this year. For AT&T, that would deliver “the right price” and gets the service “to where it is profitable,” according to Stephenson.

But customers are likely to balk if AT&T reduces channel lineups at the same time it raises prices. AT&T has already faced substantial DirecTV Now customer defections after last summer’s rate increase, and the company has also reduced new customer sign-ups by cutting back on new subscriber promotions, which often included a free set-top streaming device. Waiting to pick up exiled streaming and satellite customers are AT&T’s competitors, especially Google. YouTube TV has proved to be a DirecTV Now killer, now charging $40 a month for 60+ channels. It also comes with an unlimited cloud DVR feature and a complete lineup of local channels across most of the country. YouTube TV is reportedly still growing, attracting more than one million customers so far. AT&T executives claim the service is popular only because Google is suspected of subsidizing what they believe to be an unprofitable venture by around $9 a month.

Investors are also unhappy about customers slimming down their TV packages, because average revenue per customer is cut in the process, sometimes dramatically. Wall Street was accustomed to video packages bringing in at least $100 a month. In many cases, that revenue is cut in half after a customer switches to a streaming provider. AT&T hopes investor pressure on those new ventures and ongoing wholesale programming rate increases will both conspire to bring back familiar annual rate hikes for streaming services as well. Programming cost inflation almost feeds itself. As programmers set new wholesale rate records for their networks, other programmers believe there is now room to raise their wholesale rates as well.

Programming costs are not just important for consumers, either. Wholesale programming rate inflation was one of the reasons AT&T spent $49 billion to acquire DirecTV. Volume discounts for DirecTV meant the satellite provider was paying an estimated $20 a month less on programming than AT&T’s own U-verse unit, which had a much smaller customer base. AT&T’s purchase of Time Warner, which owns several popular cable networks, was also a hedge against programming rate increases because AT&T would effectively pay any increases to itself.

(Image courtesy: WSJ)

The Journal reports AT&T executives were unprepared for the speed cord-cutting has taken hold. Most most under-30 have abandoned the concept of paying for live, linear cable television at any price, preferring a combination of on-demand streaming from Netflix, Hulu, and other video streaming services with an over the air antenna to watch local stations for free. Older Americans are gradually following suit.

According to the Journal, AT&T’s latest tactic to slow down customer departures is to make cancellation as difficult as possible:

“There’s no way that we could make the numbers we were told to make,” said Altrina Grant, former manager of a Chicago-area AT&T call center. She said some agents would promise to call back a customer about a request to drop service rather than immediately disconnecting, which would count against their compensation. Irate customers would later call another employee to ask why their request wasn’t honored, she said.

“These reps were getting thousands of dollars because they knew how to manipulate the system,” Ms. Grant said.

Cyrus Evans, a former call-center manager in Waco, Texas, said employees’ pay could swing between $50,000 and $80,000 a year depending on their performance, which was often influenced by how many disconnection requests they could deflect. Mr. Evans said employees often got angry calls from customers who had been promised their service would end, only to receive a bill the next month. He said the incentive structure rewarded bad behavior.

Former AT&T workers said the company launched a new audit team in 2017 to crack down on support staffers making promises they couldn’t keep. Ms. Grant said this initiative led the company to fire some workers but several customer-care executives are still in their jobs.

AT&T disputes these allegations, claiming false promises to customers violate AT&T’s Code of Business Conduct and are “extremely rare.”

AT&T is responding to its deepening losses of satellite television customers by slashing prices for those threatening to leave by as much as $90 a month and throwing in Visa debit cards worth up to $300 if customers agree to stay.

AT&T lost at least 346,000 subscribers during the last quarter and is on track to break an all-time record of subscriber losses, primarily attributed to cord-cutting.

When Stop the Cap! readers called to cancel, they shared stories of outrageous discounts available to anyone willing to spend a few minutes on the phone to ask, including slashed pricing, discounted or free channel upgrades, and equipment improvements. Some customers are now paying as little as $5 a month after the discounts were combined.

“It’s ridiculous,” said Stop the Cap! reader Dylan Marshall. “My old promotion recently expired and I called to threaten them with cancellation and they cut my bill by $90 a month for a year, which means my video package is costing me $15 a month. Then they offered me a free year of NFL Sunday Ticket, a $200 Visa debit card, and every premium movie channel available for three months at no charge!”

“I got $70 off my package after my credits expired last summer,” said Sandra Bizek. “It is always such a hassle to call in every year to argue with them, but they were very receptive this year. I almost thought I was being greedy when I also asked them about a gift card, which they usually won’t offer. They put you on hold and then come back and offer one. I got $100, but I know others were offered $200-300, depending on how long they have been a customer.”

It is easiest to score a good promotion if you do not already have one on your account, but it is possible for everyone — even customers still under contract — to get a better deal. One customer negotiated $25 off a month in early 2018. He had to surrender that credit, but in return his new bill will be $85 less.

Are you overpaying for AT&T’s DirecTV?

“They don’t even argue with you anymore,” said Narash, another Stop the Cap! reader. “Within two minutes he gave me $70 off my video package and then he found another $20 credit a month he could add, making my multi-hundred TV channel package about $5 a month. I couldn’t understand the guy very well and I think he thought I was hesitating to accept his offer so he also came up with a $300 Visa gift card out of the blue. I said ‘yes.’ Oh wow.”

Here is how to get your discount:

1. Start by calling (978) 890-3027. This is DirecTV’s customer retention center in Massachusetts. If your account is combined with your AT&T wireless phone and you are billed by AT&T, they may have to transfer your call to a different call center. You can also try DirecTV’s general customer assistance number – 1-800-531-5000 and say “cancel service” when the auto-attendant answers. Answer “no” to the question about moving.
2. When the representative answers, let them know you are planning to cancel DirecTV because you have a better offer from another provider (try to research an offer from a competitor that would generally interest you and be ready to discuss it). Add that you wanted to give them the opportunity to save your business by lowering your bill and enhancing the services you now get.
3. You will be placed on hold as a representative reviews your account and any retention offers you are qualified to receive. Pay careful attention to the length of the discounts and any terms that might lock you into a contract. If you do not like what you hear, thank them for their time and call back. The next deal may be much more lucrative.

Our readers offered some important tips to maximize your savings:

1. Print out your current bill so you understand exactly what you are paying for services now. If a representative tries to get you to remove services to lower your bill, let them know you can keep the same services and lower your bill with one of their competitors.
2. Explain to the representative that you wish to cancel service because it costs too much and you are considering switching to a provider like YouTube TV or Hulu. Avoid mentioning DirecTV Now, which is also owned by AT&T.
3. Do NOT simply accept the first offer made to you. When they try to lock you in, prevaricate. Ask, “is this really the best you can do?” and remind the representative you can create your own package of just the channels you want from one of their online streaming competitors like YouTube TV. You really want the lowest possible price, so could they please check one more time.
4. When you are satisfied you have gotten the best possible deal, ask them about the availability of a gift card that you have heard about others getting, to compensate for the months you paid for channels you are not really watching. You may be able to get that as well, typically in amounts ranging from $100-300. But do not make it a dealbreaker and be sure it does not lock you into a long term contract.
5. If a representative offers you nothing or seems uninterested in assisting, thank them and hang up and call right back. During high call volumes, regular representatives may be taking cancellation calls instead of customer retention specialists who are trained to offer the best deals to keep your business.

If you called for a better deal, let us know in the comment section what you were offered.

In the not-too-distant future, AT&T will be delivering television programming to its DirecTV and U-verse TV customers over the internet instead of satellite or the variant of DSL its U-verse product uses.

Appearing at Morgan Stanley’s European Technology, Media and Telecom Conference, AT&T chief financial officer John Stephens told investors AT&T will be able to slash costs of television delivery by eventually retiring satellite service and rolling its U-verse TV into a single, self-installed, DirecTV set-top box product that will rely on broadband.

“It’s a device that allows us to, instead of rolling a truck to the home, we roll a UPS or FedEx truck to the home and deliver a self-install box,” Stephens said. “This allows the customer to use their own broadband. We certainly hope it’s our own fiber but it could be on anybody’s broadband. And they get the full-service premium package that we would normally deliver off satellite or over our IP-based U-verse service.”

AT&T employees are currently beta testing the new box and the company hopes to begin rolling it out to subscribers in 2019. Assuming they respond positively to the online streaming experience, AT&T will begin transitioning DirecTV customers away from its existing satellite platform and towards internet delivery. Stephens said the benefits are obvious: no more installers, roof-top satellite dishes, and service calls to deal with signal problems.

“The key is, as we roll that out to full production or full availability to our customers, you will see subscriber acquisition costs come down significantly because it’s the cost of that box as opposed to the cost of an employee rolling a truck, climbing the roof and installing the satellite [dish],” Stephens added.

The transition to less costly delivery platforms may be just in time for AT&T, which saw historically large subscriber losses on its DirecTV satellite platform. Other providers reported significant losses as well, demonstrating cord-cutting is a growing trend in the pay television industry. DirecTV’s expensive fleet of satellites carry not only nationally distributed networks but hundreds of local television stations beamed regionally to customers. The economics of satellite television may become questionable if customers continue moving away from linear, live television. Internet delivery services are much less costly and offer more robust on-demand viewing options.

Rural Americans may face the consequences of any transition. They are least likely to have suitable broadband service capable of supporting DirecTV’s streaming video service and could lose access to television altogether if AT&T (and Dish) retire their satellite fleets. That may be a small concern to AT&T, which has 25 million subscribers, the vast majority of which have access to broadband internet.

After raising rates last month for its cable TV streaming alternative, AT&T’s DirecTV Now today announced it was adding NFL Network to all packages except the budget-priced “Live a Little” tier.

Coming soon, customers will also have access to stream NFL Network through Watch NFL Network, available on NFL.com and the NFL app across connected TV and mobile devices.

NFL Network will provide extensive coverage of the NFL’s 2018 Preseason, airing the entire slate of 65 preseason games, highlighted by 15 live games. NFL Network’s live preseason schedule kicks off Thursday, August 9 with the New York Giants hosting the Cleveland Browns at 7:00 p.m. EDT. Also featured as part of NFL Network’s package of live preseason games are top picks Sam Darnold (Falcons-Jets, August 10 at 7:30 p.m. EDT) and Josh Allen (Bills-Browns, August 17 at 7:30 p.m. EDT), as well as eight playoff teams from 2017.

In addition to 13 Thursday Night Football games, NFL Network will televise a Week 8 International Series matchup from London (Philadelphia Eagles vs. Jacksonville Jaguars), a Week 15 Saturday doubleheader (Houston Texans vs. New York Jets and Cleveland Browns vs. Denver Broncos), and a Week 16 Saturday doubleheader with matchups to be determined.

Sports programming remains the most expensive component of TV packages. The addition of NFL Network will not raise the price of DirecTV Now at this time, but its cost will be a factor in future rate increases.