AT&T, owner of U.S. satellite television giant DirecTV, is finished buying satellites, executives said.
“We have launched our last satellite,” John Donovan, CEO of AT&T Communications, said during a presentation to analysts.
AT&T Communications is a business unit of AT&T that covers the company’s Mobility and Entertainment, Business, and Technology & Operations divisions.
Donovan oversees the majority of AT&T’s U.S. video services business within the company. He and other AT&T executives said the rampant growth of internet-delivered video services that bypass satellite and cable networks is so significant that it is now the company’s future.
“We are seeing shifts in viewing from traditional TV viewing — cable, satellite to on-demand viewing, and streaming on-demand viewing,” said Randall Stephenson chairman and CEO of AT&T Inc.
Those shifts, he said, have accelerated an overhaul of business models among media companies that are “recognizing that they no longer have the luxury to rely exclusively on wholesale distribution of their content to customers going through satellite and cable companies.”
“They are scrambling and they are working hard, everybody is, to figure out how to go directly to consumer, how to deliver their content directly to their audience and how to have a relationship with their audiences,” Randall said.
AT&T’s pivot away from satellites just 3 years after buying DirecTV is certain to rekindle debate within the satellite industry about the future of satellite television, which is often half or more of a fixed satellite services operator’s revenues. AT&T’s revelation will also do nothing to assuage satellite manufacturer concerns about demand for new satellites as commercial orders drag on through the fourth year of below average demand. Only five large, commercial geostationary satellites have been ordered globally in 2018 through open, competitive bidding, down from the historic annual average of 20 or more.
DirecTV at the time of acquisition said its in-orbit satellite fleet was worth approximately USD 2 billion. AT&T had other reasons to buy DirecTV, though, according to Chris Wagner, managing partner at the consulting firm OTT Advisors.
“I would say that AT&T’s buy of DirecTV had less to do with video distribution and more to do with owning content that they can leverage to drive their direct-to-consumer business,” Wagner said in an interview. “That big piece of content that DirecTV has is NFL Sunday Ticket. So AT&T’s strategy, along with their recent buy of Time Warner, is really to complete the vertical connection between content and the consumer.”
Randall said AT&T has been “investing very aggressively” in OTT, or over-the-top, video distribution as well as a build out of fiber that he described as “probably one of the most aggressive in the United States.” Satellite, however, is something AT&T is essentially “done” with, he said.
Donovan said AT&T is learning how to appropriately price OTT set-top boxes that customers can self-install rather than rely on a technician.
“It is transformational architecture, and we know at the end of the day that we have launched our last satellite because Randall just said so,” Donovan said.
Satellite’s strength has been in its ability to distribute content linearly from one place to millions simultaneously. OTT services like Netflix are unicast, meaning they send content to viewers one at a time. Unicast has traditionally been more expensive than broadcast, giving satellites and advantage, but that is changing.
“Those costs are definitely coming down,” Wagner said, citing cloud services for content providers and internet service providers offering greater amounts of throughput.
“As broadband gets more sophisticated and faster, scales to higher numbers, and as 5G becomes more available, we are definitely going to see over-the-top as a video distribution platform that is going to meet the same scale as satellite,” Wagner said.
Personalized viewing services are one of the key drivers of OTT, he said. Viewers want to watch shows when they want, rather than when a programmer has scheduled them to air.
“If you go back in time and you think about where things were in 2008, about 95 percent of total entertainment consumption was coming through linear broadcast constructs,” said John Stankey, CEO of AT&T’s Time Warner Media division. “You think about where we are today, it’s about 55 percent. There’s been a pretty dramatic shift and it is really important that we position ourselves from a technical perspective to accommodate that.”―BCS Bureau