Drew Angerer/Getty Images AT&T CEO Randall Stephenson
- AT&T lost 403,000 DirecTV and 267,000 DirecTV Now customers in the fourth quarter of 2018.
- The wireless giant previously said it expected churn to pick up in the fourth quarter as it focused on profitability.
- AT&T's pains are in line with much of the traditional linear TV industry.
AT&T's pay-TV business got clobbered during the fourth quarter of 2018, when it lost more than 650,000 subscribers.
Reporting quarterly earnings today, the wireless giant previously said to expect a pick up in churn in the fourth quarter as it focused on profitability by rolling back promotional offerings. The losses, which BTIG analyst Walt Piecyk said were the worst in the company's history, were staggering, with 403,000 DirecTV and 267,000 DirecTV Now customers cutting the cord.
The quarter before, the company shed 346,000 DirecTV customers and added 49,000 DirecTV Now customers.
AT&T is suffering much like the rest of the linear TV industry as companies like Netflix and YouTube have spurred a cord-cutting revolution, offering cheaper or more customizable options. Cable and satellite companies have fought back with digital video offerings, also called vMVPDs, that aim to retain customers by shifting them from traditional to digital in the same company, like DirecTV Now does.
More troubling for AT&T is that growth of digital television has likely already peaked, and it means cord-cutting will probably worsen in 2019, according to a Morgan Stanley research note.
AT&T already appears to be changing its DirecTV strategy.
It notified a group of dealers who sell DirecTV products that their contracts would end on December 1, according to dealers who spoke with Business Insider. Those who will retain their contracts have been given a mandate to more aggressively sell non-satellite products.
And in November, AT&T CFO John Stephens suggested DirecTV's satellite television service would eventually come to an end. Speaking at a conference in Europe, Stephens spoke about a DirecTV streaming service that would roll out in 2019, Fierce Wireless reported.
"It's a device that allows us to, instead of rolling a truck to the home, we roll a UPS or FedEx truck to the home and deliver a self-install box," he said. "This allows the customer to use their own broadband. We certainly hope it's our own fiber, but it could be on anybody's broadband. And they get the full-service premium package that we would normally deliver off satellite or over our IP-based U-verse service."
The service would enable AT&T to cut installation costs and require fewer dealers to install satellite services. It would also mean that AT&T could retain the customer relationship in place by transferring satellite customers to an over-the-top option. For its part, AT&T says it has no plans to discontinue satellite service.