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20 Oct

AT&T Takes Thin Margins On DirecTV Now Service, Say Analysts

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According to analysis, it is found that AT&T will accept mid-single-digit profit margins and price their upcoming virtual Multi Channel Video Programming Distributor (MVPD) service that is to be released recently, at around fifty to fifty-five dollars.

“We view DirecTV Now as a potential game-changer, but with two caveats: The customer is not locked into a contract and Hulu is expected to launch a competing OTT product in early 2017,” Nomura analyst Jeffrey Kvaal said in a research report.

Kvaal predicted that DirecTV Now would be launched with a price of fifty-five dollars per month. However, UBS analyst John Hodulik predicted that the DirecTV Now service, which will have more than hundred channels at the time of its launch, would be priced at fifty dollars for a month.

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Many of the experts believe that this is a much aggressive pricing for a television service that has locked down channels from most of the popular and important conglomerates, including broadcast networks. The outstanding programming deals from AT&T include CBS Corp,, AMC Networks, and 21st Century Fox.

“If they price too aggressively, there is an obvious risk of cannibalization,” MoffettNathanson analyst Craig Moffett said. “They make very attractive margins on their legacy DirecTV business today. Offering an internet-based alternative will mean lower costs, particularly for equipment, so they can justify a lower price. But that doesn’t mean they can justify pricing at razor thin margins. That would be cutting off their nose to spite their face.”

AT&T CEO Randall Stephenson agreed that the DirecTV Now service would be rolled out with thin margins, speaking to the investors. “We’ll be rolling it out in a couple of months,” Stephenson told attendees at an investors conference.

“We’re talking 100-plus channels at a very, very aggressive price point. And when you buy this content, the data required to stream it onto your mobile device is incorporated into the price of the content … If you choose to use that in a mobile environment on AT&T, your data cost is incorporated into your content cost.”

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