AT&T to Sell DirecTV as Streaming Service

Three new streaming services will launch before the end of the year.

AT&T wants to take DirecTV over the top.

The telecom company, which acquired cable giant DirecTV last summer, plans to launch three new subscription streaming services during the fourth quarter of 2016 that promise pay TV content over the Internet without the the annual contracts, satellite dishes and set-top boxes. Exact pricing or content bundle specifics have yet to be announced.

The push into streaming is big step for AT&T as it looks for new ways to turn young, cord-cutting millennials and other mobile-first consumers into loyal TV customers. It also puts the telecom company into competition with Dish's SlingTV subscription video service.

AT&T will sell three different DirecTV plans. DirecTV Now will look similar to the programming that cable customers can already subscribe to via DirecTV but will be available on-demand and via live streaming and will offer premium add-ons and exclusive AT&T Entertainment Group content; DirecTV Mobile will be tailored to people who prefer to watch video on their smartphones; and DirecTV Preview will feature a small selection of premium TV and "millennial-focused" video from joint venture Otter Media in a free, ad-supported experience.

While there's no shortage of companies trying to negotiate deals for skinny streaming TV bundles of their own — Apple and Amazon are among two players that TV executives have pointed to — AT&T is positioning its forthcoming service as something broader. "I would compare what we're trying to do more to what's available in pay TV today," says Tony Goncalves, senior vp strategy at AT&T Entertainment, describing the service "high quality premium content, live and on-demand, and making that sort of robust offering available across the board to consumers."

Although AT&T has yet to announce any of its content deals, Goncalves notes that there are already some deals in place, as well as additional ongoing conversations. He adds that he expects deals to fall into place faster than they might for providers looking to create skinny bundles because they aren't trying to shave content to reach lower price points for consumers. "We're not trying to limit content offerings and we're not trying to unseat existing content providers," he says.

Regardless, AT&T will ultimately compete against DirecTV and other streaming services like PlayStation's Vue for a finite number of non-cable subscribers in the U.S. Goncalves says he estimates that the potential consumer base for the forthcoming DirecTV offerings is as many as 20 million people, but SlingTV had signed up just 240,000 subscribers in June of last year (the last time it reported subscriber numbers) and HBO Now has around 800,000 subscribers since its April 2015 launch.

"That's why we feel like what we need to do is offer a robust offering with a good amount of content as opposed to very targeted offerings," says Goncalves. "Being a scaled provider like we are with the reach that we have, creating offers of content that are premium in nature and appeal to lots of consumers is really important. It's the only way to reach scale."

For AT&T, encouraging people to watch more video on mobile devices could give its cell phone data and broadband Internet businesses a boost, even if it is not requiring an AT&T connection to sign up for these services. AT&T currently offers an unlimited data plan for people who already subscribe to its DirecTV or U-verse pay TV services and could install a similar program for subscribers to these new streaming services.