By taking DirecTV bundles OTT, AT&T opens new front in pay-TV battle and its future

Score one (a very big one) for AT&T, which this announced it will be launching a trio of streaming services to both mobile and fixed broadband consumers featuring DirecTV content bundles.

The move, which is slated to begin by the fourth quarter, allows AT&T to “deliver content in the way the customer wants to consume it,” said John Stankey, CEO of AT&T Entertainment Group.

It also beats every other major pay-TV company to the punch, delivering a truly virtual MVPD, complete with live linear content from networks, on-demand content and a wide variety of other premium content available as add-ons.

The target? Cord cutters, cord nevers and, frankly, the future of pay TV.

As Stankey said, the new OTT products are aimed at customers AT&T and DirecTV “haven’t historically done a great job of addressing.”

And that mindset is crucial because AT&T – and every other pay-TV provider out there – is seeing their traditional audience steadily erode.

AT&T is making sure there’s nothing off putting about the new offerings; all require no contracts and no special hardware to use, a criterion critical to commitmentphobic Millennials, especially when it comes to video and music streaming services.

AT&T is even going so far as to not require consumers to use its own mobile or fixed broadband services, opening the OTT products to anyone with an Internet connection that, again, is a nod specifically to Millennials.

Here’s the breakdown:

DIRECTV Now:  Will include a range of content packages, including much of what is available from DirecTV today — on-demand and live programming from many networks, plus premium add-on options. Customers will be able to access the service over a wired or wireless Internet connection and on Internet-enabled devices. Consumers can simply sign-up for the service, download the app and begin watching.

DIRECTV Mobile: A mobile-first user experience that will include premium video and made-for-digital content. Consumers can start watching video immediately after the same simple sign-up and app-download process.

DIRECTV Preview: A free offering that will feature some of the quality programming available on DirecTV today. The ad-supported service will showcase content from AT&T’s AUDIENCE Network, many networks and other content sources, and millennial-focused video from Otter Media.

“We are looking at these offerings differently than others in the market. We often hear from customers who want more content from streaming services, or who can’t get or can’t afford a traditional pay-TV service,” Stankey said. “We intend to offer customers a quality pay-TV experience, including top channels, sports and more, with increased value and flexibility of pure online streaming and no need for home installation.”

As Dish Network has discovered with its Sling TV offering, there’s significant demand for an alternative service. Sling TV, which is just a year old, already has an estimated 600,000 subscribers with forecasts pointing to 2 million by year’s end.

The rub, of course, is that Sling TV may be cannibalizing Momma Dish to the tune of 150,000 odd subscribers lost.

That may also happen to AT&T’s U-verse TV and to DirecTV’s satellite pay-TV offering. But U-verse already is seeing significant subscriber losses. And, they’ve stretched out over the past three quarters – the first losses U-verse has experienced since launching in 2006. DirecTV, meanwhile, saw strong growth in Q4 but has seen losses, too.

The writing is on the wall: The traditional pay-TV model is unraveling.

Is it a surprise that AT&T is one of the first big players to see that?

Not really. After all, it’s already dealt with the demise of landlines – once the core of its business — and the rise of the mobile phone, which has become the new core.

Change is more firmly a part of AT&T’s DNA than that of its competitors.

Again, Stankey hit the nail on the head: “These new video subscription models reflect the flexible content choices, viewing options and simple, transparent pricing that consumers want. AT&T intends to be the first company to deliver that flexibility, along with an effortless customer experience. These offers will provide a broad range of customers with greater freedom and choice to watch, binge and even buy premium content, regardless of how and where they enjoy their entertainment.”

While some say AT&T is taking a very big risk with its existing services, I disagree. Bold, sometimes audacious moves often turn out to be very big wins. This one has all the earmarks. It’s set to grab the early rewards of a first mover.

On top of that, one of the biggest concerns pay-TV operators have is the cost of churning customers. While a significant portion will always be trying new services and surfing for the best deals, an even bigger issue is the legions of customers that providers lose when the change residences – even if it’s just across town.

Americans move a lot. With a virtual pay-TV offering, one that you just take with you, whether you move across town or across the country, churn becomes a moot point; certainly less of an issue.

Another big win.

Stay tuned.

Jim O’Neill is Editor of Videomind and Principal Analyst at Brightcove. You can follow him on Twitter @JimONeillMedia and on LinkedIn