The Price Point | AT&T TV’s Odd Play As ‘The Future Of TV’

The consumer video touting AT&T’s latest television service begins with — wait for it — “Welcome to the future of TV.”

I’m so glad they told me. It saves time trying to figure out the difference between AT&T Now (or is it still DirecTV Now?), DirecTV, U-Verse (which may have gone away, but may not) and all the other AT&T branded services. I guess that’s why the bills they send me are so clear and easy to understand.

You cannot be blamed at first glance for thinking AT&T TV is yet another OTT service. Actually, it is something else entirely; more akin to DirecTV than cable light. When one looks at the details and long-term pricing, it becomes easy to see AT&T TV is intended to replace DirecTV.

It is also an effort to control the video gateway into the home. Rather than think of the new service as OTT, it would be more correct to think of it as IP-based in the same way that a home or office phone is now IP-based. The app side of the box is of course OTT.

This is an odd play because it comes at a time when consumers are moving away from hardware-based services to cloud-based, featuring virtual boxes, DVRs and other screen-only products. The consumer is making this move partly because of price, partly because changing providers is now simple.

At worst, one has to obtain only a new stick and remote. This ability to easily cancel services gives the consumer bargaining power not available to someone whose home is locked into proprietary boxes, not to mention the long-term contracts AT&T TV requires.

Though going against the grain, AT&T’s new service actually makes good business sense. Not only are DirecTV subscriptions dropping faster than the price of an analog TV at a garage sale, remaining subscribers are often rural, elderly and basic. Those primarily interested in Wheel of Fortune are unlikely to add the premium services that represent real profit.

If AT&T can transition enough DirecTV customers to their new boxes, they will eventually be able to offload the installation, maintenance and satellite costs that must now be born above and beyond the cost of content. Rural customers without high-speed internet would be lost, but cost savings should at some point more than make up the difference.

Add to this the value of spectrum. With that kind of incentive, current DirecTV subscribers should soon expect phone calls and mail offers to convert.

AT&T TV also provides a way for the company to compete for the urban households that have been unwilling, or unable, to use outside dishes. U-Verse was the first attempt at that market but limited by geography. DirecTV/AT&T Now was simply a reaction to falling subs and competition from cable light providers. AT&T TV is different in that it appears to be a carefully thought out strategy that checks all the boxes. At the end of the day, the consumer will have the last word, so time will tell.

With so many choices for home video one could easily feel overwhelmed, but do not worry. There is no reason to be confused. I have heard on good authority that “the future of TV is AT&T TV.”  What a relief.

Hank Price is a media consultant, author and speaker. He is the author of Leading Local Television, a handbook for general managers. He spent 30 years managing TV stations for Hearst, CBS and Gannett, including WBBM Chicago and KARE Minneapolis. He also served as senior director of Northwestern University’s Media Management Center and is currently director of leadership development for the School of Journalism and New Media at Ole Miss.