Price Hikes Loom for DirecTV Now in AT&T's New Push for Profit

(Bloomberg) -- AT&T Inc. is reportedly raising prices on its online-TV service, DirecTV Now, a sign that the company is putting profit ahead of subscriber growth.

Starting next month, customers will see a $10 price increase, according to a report on Cord Cutters News. AT&T also will introduce two new TV packages, at $50 and $70 a month.

DirecTV Now -- a bundle of TV channels delivered online -- was meant to attract cord cutters who were abandoning traditional satellite and cable packages. But it’s turned into a competitive business with tight margins. DirecTV Now is facing off against Sling TV, as well as Google’s YouTube TV and Hulu’s live service, which together have racked up millions of customers.

The new $50-a-month bundle, called DirecTV Now Plus, includes HBO and more than 40 channels, such as ESPN and Fox News. The $70 DirecTV Now Max has HBO, Cinemax and more than 50 channels, including several sports networks.

Previously, AT&T offered a $40 package with 65 channels and a $55 bundle with 85 channels. Current customers can keep their existing plans, but new subscribers will have to select one of the new packages. The move to fewer channel selections -- combined with a price increase -- will lower the costs for AT&T while boosting revenue from each account.

‘Less Compelling’

The question now is whether consumers will go along.

“While the new pricing will certainly help DirecTV Now move toward gross-margin profitability, it does appear to make its service far less compelling to consumers,” Rich Greenfield, an analyst at BTIG LLC, said in a note Monday.

AT&T, based in Dallas, didn’t have an immediate response.

AT&T also offers a 35-plus-channel package called AT&T Watch TV for $15 and includes the service free to its mobile subscribers who have unlimited plans.

Burdened with about $175 billion in debt, AT&T has had to turn its efforts away from price cuts and service promotions in order to make debt reduction its priority in 2019. But even as it attempts to rein in spending, AT&T is preparing to launch a cost costly new streaming platform later this year that will compete with Netflix and Amazon.

To contact the reporter on this story: Scott Moritz in New York at smoritz6@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Rob Golum

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