The launch of DirecTV Now, a hundred plus channels video service based on internet, is nearing its release and the television industry is waiting for AT&T to announce the pricing details of the service. How much the rivals of AT&T, like Charter Communications and Comcast, should worry about the DirecTV Now service, depends on the pricing of the service.
The pricing of DirecTV Now service could have big impacts on the strategies followed by Hulu, Google, and Amazon as well. Hulu is planning to launch a new live streaming TV service by the start of 2017, and according to analyst Craig Moffett, “If they [AT&T] price too aggressively, there is an obvious risk of cannibalization.”
“They make very attractive margins on their legacy DTV 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,” he added.
Many analysts predicted that AT&T might sell their DirecTV Now service for charges between 50 to 55 dollars, where the streaming service from Hulu is expected to cost around forty dollars a month. Hulu is a joint venture of 21st Century Fox Entertainment, Comcast, and Walt Disney. Time Warner has also bought a ten percent share in Hulu.
AT&T CEO Randall Stephenson said that they would accept thinner margins for the DirecTV Now service. Still, there is wiggle room in the comments of AT&T, as DirecTV Now is a fat bundle that offers a lot of content to the users.
Experts say that programming will be the biggest cost for AT&T. William Power, who is an analyst at William Blair, said that AT&T might use the content delivery network of Akamai Technologies to offer internet videos to their users.
In fact, AT&T might need Akamai’s services. as DirecTV Now streams live TV that includes major sports coverages. DirecTV Now usage will not be counting towards monthly data caps for the wireless users of AT&T though, and that was made clear by the company last month.
Analysts at UBS estimate that the DirecTV Now service will have about 2.5 million users by the end of 2020. John Hodulik of UBS thinks that the OTT competition will be much heated up by 2020 and might even affect the number of users of DirecTV satellite connection.