AT&T (T) made an announcement last week that their DirecTV NOW has hit the one million customers mark after just one year. This is big news and they are celebrating. It’s not unusual to see a company celebrate their victory in a market, but this is bigger news than most realize. AT&T is growing and transforming not only itself, but the entire pay TV industry.
AT&T is rapidly changing and growing in many different directions in segments like wireless, high speed Internet, pay TV and more for the consumer and business marketplace. Several years ago, when they started their Uverse IPTV business, they began this journey to transform the entire pay TV space, which at the time was led by cable TV. In fact, with AT&T Uverse and Verizon (VZ) FiOS entering the picture, the term for this larger industry changed from cable TV to pay TV.
Then a couple years ago AT&T acquired DirecTV and started to compete more directly and more strongly with traditional cable TV providers like Comcast (CMCSA) Xfinity and Charter (CHTR) Spectrum. They innovated.
AT&T DirecTV NOW Hits One Million Customers
They began to innovate and turn the pay TV industry upside down. They created DirecTV NOW, introduced lower cost bundles of services, introduced wireless TV or mobile TV, letting the user watch live TV on their smartphone or tablet anywhere in the USA and much more. Now they are trying to acquire Time Warner (TWX) to continue in this journey to transform and expand pay TV.
Over the last year, AT&T added more than 200 local channels to DirecTV representing all four major broadcast networks. This covers 80 percent of all US households. And coming in 2018 they will commercially launch their next gen video platform, which will feature a DVR in the cloud to record shows, Download-and-Go, 4K and HD quality video, capacity for more than 35,000 titles on demand, individual profiles, more concurrent streams and more.
Comcast and AT&T Are Top Two Competitors in Pay TV
This is who AT&T is. They are innovators, first movers, creating new segments and growth. Most people don’t realize it, but the AT&T growth in pay TV is rapid. Today, they are second only to Comcast. Will their rapid growth ultimately take them to number one? Comcast is not sitting still. In recent years, they introduced their own Xfinity and in the last few months, Xfinity Mobile in order to combat the new AT&T threat with real muscle.
This new thinking around the bundle of services shows Comcast now understand what the telephone companies learned a decade earlier. Bundling works. Bundling keeps customers with you.
In fact, Charter Communications introduced their Spectrum service around the same time as Comcast Xfinity. It’s a way for them to rebrand their new and expanded business model. Charter is also getting into wireless in 2018.
They did not acquire a major content player like Comcast did with NBC Universal. That may be why they are not showing the same level of growth yet. I expect movement in the same direction.
Comcast Xfinity Mobile and Charter Spectrum Expanding to Better Compete
So, the lesson is clear. Cable TV sees the writing on the wall and is preparing for battle with Ma Bell. All these companies are expanding themselves in an industry that is also expanding, to meet the new competitive challenges and opportunities going forward.
With all that said, growth at AT&T is in high gear. They are just beginning. But they need to keep adding wood to the fire or the flames of growth will die down. That’s why they want to acquire Time Warner for content, the same way Comcast acquired NBC Universal and Verizon acquired Yahoo and AOL.
This is the new direction the industry is heading in, and in order for AT&T to remain competitive, they must expand in content like their competitors are doing. This is the way industries grow.
In fact, Comcast is taking another step, recently saying they also want to acquire 21 Century Fox (FOXA) for similar reasons.
Next Step for Pay TV Growth: Combining Networks and Content
Companies today are combining networks and content. The future of the industry will continue to grow and change over time, as it always has done over the decades. This is the new and expanding direction the industry continues to head, as is has in the last several decades and in fact for hundreds of years. This is where growth comes from for investors. This is where innovation comes from for users.
Ten years ago, Blackberry (BBRY) and Nokia (NOK) were leaders. Ten years before that Motorola was the leader. Today, leaders are Apple (AAPL) iPhone, Google (GOOGL) Android and Samsung (SSNLF) Galaxy. This explosion of growth is good for everyone, customers, investors, competitors and in fact the entire industry.
That’s what we can look forward to as the industries continue to transform and to grow. That’s why AT&T is doing such strong business as it expanded DirecTV to DirecTV NOW, wireless TV or mobile TV and more. That’s what we can expect with their acquisition of Time Warner as well.
It’s all about growth. Growth for the companies. Growth for investors. Growth for customers. Growth for the industries. And creation of new sectors like wireless TV and whatever is coming next. Something we never had before. And we are still in the very early stages of this next big transformation and revolution. So, buckle up, the ride is just beginning!
Jeff Kagan is an Equities.com columnist. Kagan is a Wireless Analyst, Telecom Analyst, Industry Analyst, speaker and consultant. He follows wireless, wire line, telecom, Internet, cable TV, IPTV, Cloud, Mobile Pay, FinTech and communications technology. Email him at [email protected]. His web site is www.jeffKAGAN.com. Follow him on Twitter @jeffkagan.