AT&T TV, an over-the-top bundle of channels with a cloud DVR, has launched in 10 test markets in California, Kansas, Missouri, Florida and Texas, ahead of a nationwide rollout expected by the end of 2019.
The telecom giant began offering the service Monday in Orange and Riverside counties in California, as well as West Palm Beach, FL; Topeka and Wichita, KS; St. Louis and Springfield, MO; and Corpus Christi, El Paso and Odessa, TX.
CEO Randall Stephenson has predicted the new service will become the “workhorse” of the company’s pay-TV lineup over the coming years. No timeline has been set forth for the expansion of the trial but new markets will be added through the remainder of 2019.
AT&T also operates U-verse cable and DirecTV satellite systems, as well as the low-cost Watch offering. Speaking to Wall Street analysts during the company’s second-quarter earnings call last month, Stephenson said the operational focus will increasingly be on AT&T TV. In a telling move, the company just rebranded DirecTV Now — the internet-delivered offshoot of DirecTV — as AT&T Now. In 2015, AT&T paid $67.1 billion to acquire DirecTV.
“We have some really high expectations for this product,” Stephenson said. “We’re going to learn from the pilot, and then we’ll expand to more cities as we go through the year.”
Unlike AT&T Now, AT&T TV requires a contract. With a two-year contract, prices range from $60 to $80 a month without internet access, across five different tiers of service. Local stations are not offered in all markets as of yet.
In Stephenson’s estimation, the new service is a more efficient way for the company to approach the pay-TV marketplace. “It literally takes the customer acquisition costs and cuts it in half,” he said on the earnings call. “And the beauty of that is that you can begin to address a fundamental problem with the current linear TV business, and that is the price point, but the content costs just continue to grow.”
AT&T has had two high-profile carriage battles this summer, one with CBS that was resolved a few weeks ago and an ongoing standoff with Nexstar Media Group involving about 120 local TV stations in 100 markets. Like all pay-TV operators, the company has faced a squeeze due to increasing options for consumers and rising fees charged by programmers.
At the same time it is contending with flux in the distribution arena, AT&T is also continuing to digest its $81 billion acquisition of Time Warner and ramping up its entrant in the streaming wars, HBO Max.