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Wow - DirecTV loses 346,000 DirectTV/U-verse subs in 3Q18

Discussion in 'DIRECTV General Discussion' started by wilbur_the_goose, Oct 24, 2018.

  1. slice1900

    slice1900 Well-Known Member

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    Converting customers from satellite to anything non-satellite would be stupid. Once they have a satellite customer installed, it costs them exactly $0/yr to maintain them. That number is non-zero for all other possible solutions.

    The only benefit to getting rid of satellite comes at least a decade from now, when they'd need to replace a satellite.

    For new installs satellite costs more because they need to visit the customer's home to install the dish, so they will probably prefer non-satellite installs once they get that new service running smoothly. But they'll still have satellite as an option, but someday maybe new customers will have to pay something up front for that install instead of having it free.
     
  2. NashGuy

    NashGuy Active Member

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    Of course it doesn't cost AT&T $0/yr to support their existing base of DBS subs. There are always some number of DVRs that fail (often the hard drives) or other issues that need to be addressed (like when I had a tech come out to see if anything could be done to mitigate my continued rain fade problems).

    That said, it does seem unlikely that AT&T would proactively target their current DBS subs with messages trying to get them to switch over to the forthcoming streaming service (although I wouldn't rule that out if AT&T has a target date by which they're trying to get X% of their base on OTT rather than DBS). And I do expect that DBS subs calling in asking for retention discounts or looking to get replacement or upgraded hardware will be pitched the new streaming service (which will supposedly have somewhat lower regular monthly pricing) as an option to migrate to. If it's going to cost AT&T something to keep a current sub on DBS, I'm sure they'd instead rather just spend a modest amount to send them the new OTT STB (probably the C71) and transition them over to what they see as their future platform.
     
  3. mjwagner

    mjwagner Icon

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    I’m curious as to how the cost can be “exactly $0/yr to maintain”? Surely their must be some cost that is non-zero. But I certainly could be missing something.
     
  4. slice1900

    slice1900 Well-Known Member

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    Because once the satellites are in orbit, adding another customer doesn't cost them anything since the broadcasts wash over your roof whether you have a dish up there or not.

    Now true there are costs associated with maintaining the broadcast centers that receive the programming (which is needed for IP) and sending it up to the satellites (which IP doesn't, but this is a fixed cost that isn't affected by the number of satellite subscribers) And yeah, they might need to fix your dish (but IIRC they charge for that)

    I guess a more accurate statement would be that satellite has $0 in additional fixed costs to support a customer - it would cost them the same to deliver whether they had 1 or 100 million subscribers. Streaming costs more to deliver the more customers there are, and will inevitably lead to hassle when people experience glitches and they call Directv and are told "its your ISP's fault" and they call their ISP and are told "its Directv's fault". At least with satellite its a one stop shop, they don't have much room to finger point and pass the buck.
     
  5. James Long

    James Long Ready for Uplink! Staff Member Super Moderator DBSTalk Club

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    As I stated: "Satellite's distribution is a cost per channel available plus paying the channel for the retransmission rights. Streaming's distribution requires the distributor to pay for each customer's connection at their end. While the cost of a replacement satellite may appear to be expensive, it is affordable when looking at the big picture."

    Expanded: DIRECTV receives a feed from a channel. Most channels are received via satellite from the distributor - the same feeds used to feed DISH and cable systems (as well as other systems using a headend to customer design). That feed is passed through one of DIRECTV's broadcast centers and transmitted to satellite. The cost of receiving and retransmitting that channel is fixed - it is the same whether one person is watching or a billion people are watching.

    Delivery via streaming requires a content delivery network (CDN) capable of serving each individual viewer. The source of the stream can either be the service (for example, DIRECTV NOW could receive each channel via satellite at a headend or various headends at data centers around the country to serve their customers) or at the content provider (for example, a provider such as ABC/Disney could provide a CDN for their channels and allow DIRECTV NOW customers to connect to their CDN using DIRECTV NOW credentials). The cost of receiving and retransmission of each channel is per customer. One person watching requires the CDN to be built to serve one person - one billion watching requires the CDN to have the capacity to serve one billion streams. Regardless of who owns the CDN the network must be paid for as part of the subscription price.

    If the CDN does not have the capacity to serve all of their subscribers then the system fails. The per-viewer capacity limit is not present on satellite. CDNs need to be robust enough to handle peaks where "everyone is watching something". Satellite doesn't have that problem since they can handle an unlimited number of viewers 24/7.

    Streaming providers hope that subscribers don't watch their content at the same time. Their system works best when they have a few million subscribers paying and a few thousand people watching at their peak times. A family watching five different things at the same time (or even the same thing on five devices) kills their profitability.

    As streaming grows streaming providers are going to need to grow their CDNs to keep up with the demand. Every streaming customer that moves from watching an hour a week of streaming to 10 hours a week puts a demand on their network. Every streaming family that moves from watching 10 hours a week to 100 or 200 hours a week threatens to break their network. It will cost money to keep up - and the streaming customers will end up paying.
     
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  6. TheRatPatrol

    TheRatPatrol Hall Of Fame

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    You should send that in a memo to AT&T. All good and valid points.
     
  7. mjwagner

    mjwagner Icon

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    So to summarize, the cost is actually not “exactly $0/yr to maintain”. It is some non-zero amount. Each customer does cost something even if it is a small amount.
    Based on your argument one could surmise that in fact as the number of subscribers increase the actual cost per subscriber goes down, approaching zero but never actually zero. On the other hand, as the subscriber numbers decrease (which is unfortunately the situation D and the other sat companies find themselves in) the cost per subscriber actually goes up.
     
  8. mjwagner

    mjwagner Icon

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    Well since it's even cheaper for the sat companies to deliver content to the individual subscriber then the OTT providers they are apparently gouging their customers even more than I thought.... LOL...I guess they need to have some way to pay all those AT&T "executives"...
     
  9. slice1900

    slice1900 Well-Known Member

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    The reason OTT MVPDs charge less is because it is new so they're in the "customer acquisition" stage. They are all losing money on it. The pricing will not stay as low as it is once things shake out and the weak hands like PSVUE throw in the towel. This is why AT&T bought Directv, they wanted to insure they had scale and were not one of the weak hands that would be forced to give up.

    Because of competition they will never make the profit margins that Directv does on satellite, but Directv has chosen to shoot for higher income customers than Dish has. Thus Directv's ASP is $128/month versus Dish's at $85 (I saw that figure recently, not sure if Dish was the source or if someone was guessing) Obviously Dish doesn't cost 50% more than Directv, so the average Directv subscriber is choosing a higher level of service with bigger packages, more receivers or whatever.
     
  10. WB4CS

    WB4CS Active Member

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    Thank you for dishing out that knowledge! I had no idea that streaming services worked that way. I assumed that it worked similar to an IP multicast. I think of satellite as similar to a multicast... one "data stream" with many clients digesting that data. In a one-to-many data stream, the client (your receiver) and server (the satellite) don't need to establish a connection. So it shouldn't matter how many clients are receiving that stream simultaneously. That's how I would have assumed streaming, like DTVN, worked. But it sounds like OTT streaming is more like a peer-to-peer (one-to-one) connection, where the stream I'm watching is being delivered exclusively to my device?

    Blame it on the network engineer who's lifelong hobby has been RF/Radio/Satellite (me) to want to really understand how this works LOL. Not to mention, I was planning on canceling DTV tomorrow and going full-on DTVN after testing it out for a week. :)
     
  11. James Long

    James Long Ready for Uplink! Staff Member Super Moderator DBSTalk Club

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    I am sure AT&T understands the math. But they also understand that they have to follow the customer's preferences. They could refuse to offer OTT services, but as long as people are leaving cable and satellite for OTT AT&T might as well try to capture that market.

    A for profit company makes money. The difference between a fair profit and gouging is a matter of opinion. How much do you believe AT&T should profit per customer per month? $10? $1? 50 cents? Most of a DIRECTV customer's payment goes to the content providers, not profits.
     
  12. mjwagner

    mjwagner Icon

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    It’s not up to me, it’s up to the marketplace...and it’s deciding, at an ever increasing clip based on the most recent numbers.
     
  13. James Long

    James Long Ready for Uplink! Staff Member Super Moderator DBSTalk Club

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    The market is ignorant. They don't know the profit margin. A claim of "gouging" is not supported by facts - only feelings.
     
  14. mjwagner

    mjwagner Icon

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    The profit margins have been and will continue to be squeezed. The increased competition and near frictionless provider switching costs with the OTT providers will continue to keep pressure on prices. Will prices go up some, highly likely. How much and how fast none of us know. For large segments of tv entertainment consumers the days of $100+ monthly bills are over. As I’ve said many times, all of this is good news for consumers.
     
  15. mjwagner

    mjwagner Icon

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    The marketplace is certainly ambivalent and doesn’t care about the details for sure. But it is the final arbiter. The consumer will vote with their pocketbook as always. I personally don’t really care whether D, Dish, cable cos, or any of the OTT providers continues or goes belly up. I do find the industry and the changes it is currently going thru very interesting which is why I’m still here participating in these discussions.
     
  16. slice1900

    slice1900 Well-Known Member

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    There are economies of scale in delivering TV via streaming, both on the delivery side (because you can amortize fixed costs across more subscribers) and the content acquisition side (Directv before acquisition paid $14 less per customer for content than Uverse TV did for the same stuff, because their size gave them more leverage)

    The weaker players will throw in the towel, and we'll be left with a few big players. They'll still make profit, they aren't going to allow themselves to be commoditized. Enjoy the cheap streaming you can get today, once cord cutting accelerates to the point more people are streaming than getting traditional cable/satellite there will be a big shakeout and the low prices you can get today for Directv Now, Sling etc. will not last.

    Narrowly focused providers like Netflix probably won't need to increase their prices, but the only content they will have is their own original stuff. All the movies and back catalog TV shows people originally subscribed to them to get will be pulled into streaming options run by the studios like Disney's.

    These companies exist to make money, not to give the best deal to consumers. I don't get why people see streaming as freeing them from the shackles of evil profit centered companies. There may be a shakeup and you get DIFFERENT evil profit centered companies, but they'll still make as much money off you as they did before, or you'll choose to have access to less content as a way of saving money.
     
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  17. spear61

    spear61 Godfather

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    I would think the reason they would want to convert from satellite to non-satellite would be to make their cellular/data service customers "sticky".
    Verizon, AT&T, T-Mobile are always working to poach each others customers and locking in the TV service would discourage "jumping"

    That said, the brother-in-law went to Direct Now or whatever they call it three weeks ago and then had them rip out the Directv satellite.
    This week, the sister-in-law informs me that the techs will be returning to reinstall the satellite system.

    She likes the simplicity and fast clicks of satellite - period- end of story for the brother-in-law.
     
  18. slice1900

    slice1900 Well-Known Member

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    How is a customer getting video via IP more sticky than one getting video via satellite? The reason they bundle is for discounts, not because they fear losing their TV if they switch to a different ISP.

    Once you go to some sort of streaming, there are more options at more price points so such a customer is probably less sticky than a Directv satellite customer.
     
  19. James Long

    James Long Ready for Uplink! Staff Member Super Moderator DBSTalk Club

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    I object to the term "convert" as it makes it sound like AT&T|DIRECTV is making customers move from one service offering to another. The guide change would be example of an actual conversion ... DIRECTV forced customers to change equipment and no longer offers the old guide. DIRECTV is quietly converting customers from MPEG2 to MPEG4 ... at some point non-MPEG4 receivers will lose channels. That is a conversion. But other "conversions" are questionable.

    Soon after AT&T bought DIRECTV we heard that AT&T was actively converting UVERSE customers over to DIRECTV. But they never stopped people from signing up for UVERSE and the recent quarterly reports show an increase in UVERSE subscriber count. If they are converting UVERSE customers to DIRECTV they are doing a lousy job. Now the forum chatter has shifted to AT&T|DIRECTV converting customers to DIRECTV NOW or to the still not yet available "satellite equivalent" OTT offering. But have any DIRECTV customer been forcibly removed from satellite delivery by AT&T|DIRECTV?

    What AT&T|DIRECTV is doing is offering options. AT&T|DIRECTV would prefer that their customers sign up for the more profitable DIRECTV satellite service than UVERSE. The company have not forced customers to switch (although zealous salespeople may have crossed the line in their encouragement to sign customers up for DIRECTV satellite). AT&T|DIRECTV would prefer that people "cutting the cord" and leaving UVERSE and DIRECTV satellite continue to send AT&T money each month ... so they offer DIRECTV NOW. Not as profitable as the other services but better than completely losing the customer.

    It is an option. Perhaps the passive "allowing a customer to convert" would be better than the active term "converting". AT&T|DIRECTV is not forcing the change.
     
  20. James Long

    James Long Ready for Uplink! Staff Member Super Moderator DBSTalk Club

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    I look at it as provider side bundling. When I had Frontier as a DSL ISP they forced me to also have their phone service. DSL only (no dialtone) was not possible when I signed up. Years ago Comcast rates for Internet were much better if you bundled with TV service. Now the Internet only rates are affordable - with some discount for bundling.

    It seems that the data providers (ISPs) have a natural audience for TV services. A forced bundle where one (for example) would get DIRECTV NOW as part of their AT&T wireless service (whether they want it or not) is on the horizon. Discounts such as zero rating data used to view DIRECTV content over AT&T is present. Even if they still charge a separate optional fee for DIRECTV NOW the zero rated data makes the service more affordable than competitive services that are not zero rated. A customer could keep their DIRECTV NOW if they left AT&T Wireless ... but they most likely would not keep their zero rated data.

    One of the biggest selling points of streaming is no commitment. The closest I have seen to commitment on streaming service are annual rates. Otherwise come and go as you please.
     

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