For AT&T and DirecTV Now, the Jig Is Up; Will Other vMVPDs Soon Cave, Too?

“This is for the first time 100-plus premium channels—not the junk nobody wants—purely over the top, a mobile-centric platform, for $35 a month.” And soon, it might be the last time. This was AT&T CEO Randall Stephenson describing the promise of DirecTV Now just 27 months ago, as the company launched what would become one of the video business’ fastest growing subscription over-the-top products. AT&T, which was about to follow its acquisition of satellite TV company DirecTV by gobbling up Time Warner —and lobbying for the Trump Administration’s corporate tax cuts in the process—was telling consumers they really could have it all for less. Or maybe not “all of it,” but most of the pay TV ecosystem, anyway, for less than half the price of a traditional linear package. Two years later, with DirecTV Now on the cusp of 2 million users, and about to claim supremacy in the virtual pay TV market, AT&T paused to look at its bottom line. How could it possibly be losing money by offering a bundle, that easily cost it $50 a month per user in content licensing fees, by selling it for $10 a less on promotion to at least 500,000 customers? For AT&T, the "virtual pay-TV" thrill ride ended in the fourth quarter, when it cut those 500,000 customers off, and DirecTV Now lost 267,000 users, about 14% of its base. And now things are about to get really dark, with the operator making good on a promise made in December to trim back DirecTV Now’s bundle and up its price. One thing is clear: DirecTV Now users will pay more money for fewer channels.