AT&T Inc. said its new streaming-video service, DirecTV Now, added at least 200,000 paying subscribers in December, its first month of operation, giving investors a first glimpse into the launch of the business.
The service was released Nov. 30 with promotional pricing and incentives, including offering a bundle of more than 100 channels for $35 a month. That promotion is now finished and the same bundle costs $60 a month. AT&T aims to attract young people, cord-cutters and other consumers who don't sign up for its traditional pay-TV packages.
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The service has hit some bumps since launch, with outages and customers complaining about technical glitches that cause crashes, features not functioning and other bugs.
On Friday, the carrier said it added more than 200,000 net video additions through December, "entirely driven" by paying DirecTV Now subscribers. The number of DirecTV subscribers may be higher as the company has posted net video losses recently, including losing 3,000 in the third quarter and 49,000 in the second quarter.
A company spokesman declined to comment beyond the company's regulatory filing. AT&T reports fourth quarter results on Jan. 25.
Earlier this month, J.P. Morgan analyst Philip Cusick said he expected significant initial interest in the new service. "We would not read much into that given the $35/month promotion and could see a quick fall off in adds once the promotional pricing ends and customers start to churn," he wrote in a research note.
RBC analyst Jonathan Atkin said Thursday the cost of the DirecTV Now launch could hurt profits in the quarter but the service "could serve as a catalyst for long-term growth" by allowing AT&T to use its scale to capture market share at a lower cost than rivals.
The service has established competition from video services such as Netflix and Hulu, along with Sling TV from Dish Network Corp. and Sony Corp.'s PlayStation Vue. More such services are expected to launch in the future. Netflix has 93.8 million streaming customers.
Separately, AT&T said it expects to record a fourth-quarter loss of about $1 billion related to the annual reassessment of pension and post-employment benefit plans.
The company lowered the discount rates on its retirement obligations leading to a loss of $3 billion, which was offset by other gains. Discount rates calculate the present value of a companies' future liabilities, so a drop in that rate increases the current funding needed to fund the future obligation.
AT&T also said it added a net 900,000 branded domestic wireless subscribers in the quarter and saw 700,000 legacy 2G cancellations. The company said in 2012 that it would shut down the network by 2017 and most of the service is now deactivated.
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