DirecTV Now’s $5 Monthly Rate Hike Is A Sign Of The Skinny Times

AT&T said today it will raise the monthly rate for its internet-delivered DirecTV Now service to $40, from $35.

The move follows last Thursday’s announcement by Dish’s Sling TV that it was boosting the rate for its basic service by 25%, to $25. And in March, YouTube said it was raising its rate to $40 a month, on the same level as Hulu and others. Programming costs, while not cited by any of the companies directly, are casting a shadow over the skinny services, especially the ever-escalating price of sports rights.

The move by AT&T, which comes soon after the company sealed its acquisition of Time Warner and also unveiled its cheap Watch bundle, affects new customers starting July 26. Existing customers will see the increased phased in according to their business cycle.

Bruce Leichtman, whose Leichtman Research Group tracks the pay-TV sector in granular detail, says the moves are not surprising. “These are challenged business models,” he told Deadline. “These services do not exist for stand-alone purposes. They exist for strategic purposes.”

Media companies dangling cheaper TV packages are akin to “convenience stores selling Gatorade,” Leichtman said. “They want to sell you all sorts of other things, not just that one bottle of Gatorade.”

While the skinny services seem like sidelines, they are starting to attain scale as customers explore ways to limit their TV bills and customize their programming choices. For AT&T, DirecTV Now’s 1.5 million-plus customers are still just 6% of the company’s total pay-TV business. For Dish, though, the number is 17% for Sling. And a UBS research report last month projects the skinny services will account for 25% of all pay-TV subscriptions.