AT&T (NYSE:T) appears to be one of the most discussed companies lately on Seeking Alpha along with a few others such as Procter & Gamble (NYSE:PG) and Realty Income Corporation (NYSE:O). This is of course for good reason. AT&T currently sits close to the 52-week high of $39.72 at a price of $38.39 as I write this article. In addition, the stock shows an EPS of 2.36, a P/E ratio of 16.30, and a yield of 4.99%. Although I would deem these numbers as fantastic, I won't spend more time on this as all of the company's financials have been discussed numerous times in the last week or two already. It would be useless to follow that trail any further as I would have little luck finding any more information on their financials that have not already been found and shared. Instead today I want to discuss their future endeavors into streaming.
This came to the forefront of my mind because of recent news that they are releasing a new plan that guarantees pricing for two years through their DirecTV brand and offering a 40% savings offer on their Triple Play package. Although this deal will probably attract lots of DirecTV subscribers into locking in their savings, it got me thinking into the future of TV and AT&T's plan moving forward to make sure that they stay relevant. It would appear that AT&T's answer to this is to launch their own streaming service that no longer relies on a cable or satellite subscription. Later this year, AT&T will launch internet streaming TV through three separate avenues. All three rely on the DirecTV brand name to carry it forward.
The first of the three is DirecTV Now which will for all intents and purposes be a replacement to the cable service as we know it now. It is said to include on-demand service, live programming and of course the add-ons that a lot of people love to include such as sports packages, HBO, etc. The second is DirecTV Mobile. This is their answer to those who don't necessarily want to pay a larger fee to be at the forefront of new content. A lot like other subscription streaming services, it will have a lot of shows but they won't necessarily be posted right away or inclusive of all the episodes that people would like to watch (the whole season binge we know and love).
Lastly, they will be launching DirecTV Preview which is an ad-supported platform that will basically be the lowest level of programming but still available to those who don't wish to pay directly. In this manner, AT&T can still make ad revenue for those who don't wish to pay for any of their other services. The model is pretty good. Consumers will have a chance like they do with other services such as Hulu or Netflix (NASDAQ:NFLX) to pay for just what suits them best. No numbers have yet been released as to how much each one will cost but it appears that they have got a little bit of everything for each type of consumer with the three tiers that they will be releasing. With this being said, they can adjust prices accordingly after they are released to make sure they are capitalizing on each. This should also help to keep the company highly competitive moving forward.
That being said, their competitors have been staging themselves up for the same avenue. It all started with Netflix and Hulu. Then Amazon (NASDAQ:AMZN) wanted a piece of the profits and got them through the medium of Prime Video. Now, like AT&T, others are lining up. Verizon (NYSE:VZ) bought up AwesomenessTV for their Go90 video service, Sprint (NYSE:S) started offering a monthly way to pay for Amazon Prime (Prime Video comes included), and T-Mobile opened their cell service by adding BingeOn which allows users to not have huge data fees by making it data-fee-free to watch Netlix, Hulu or HBO on their phones. It's clear then that the competitors that AT&T face are more than ready to try to compete for customers by opening up their own routes to streaming. The question then becomes which one will win the most customers? I believe that the answer to this lies in the provider that offers as close to cable TV as possible because it offers the most options. Humans can very often be creatures of habit. We have been raised since the release of TV to expect a certain level of choices.
I think this is where AT&T wins out. The model that is being launched seems to offer a little bit for every type of viewer. This is most notably where Netflix and Hulu lose out. For the viewer who wishes to bring their cable TV subscription's privileges with them into the digital streaming age, DirecTV Now should offer them the exact thing they wish for. For the person who loves Hulu but wishes for a larger provider that may be able to bring even more shows to them, DirecTV Mobile provides. Finally, for the person who wants a little bit of something but doesn't want to pay a dime, DirecTV Preview gives them a quick outlet in return for a small profit in ad-revenue.
Although there are other competitors that have either already entered the market of streaming or have a small stake in it, I feel that the offering that AT&T provides with their new streaming services will win out over them and provide a stable platform moving forward. If that's not enough, investors also can feel more comfortable with the knowledge that the company plans to continue expanding AT&T GigaPower for U-Verse which is their ultra-high speed internet capable of producing 1 Gbps in speed. This will help to not only carry their new streaming service but it will also help them stave off Google's (NASDAQ:GOOG) (NASDAQ:GOOGL) fiber-based network that has been expanding at a reasonable pace. How's that for a well-rounded profit producing machine?
Disclosure: I am/we are long T.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.