• by Wayne Friedman , Staff Writer, December 7, 2016

The complaints -- and praise -- are in over DirecTV Now: Profits will be thin initially for the new digital pay TV provider. But long term, advertising is expected to be the service's savior.

Speaking at the UBS media conference on Tuesday, Randall Stephenson, chairman/CEO of AT&T, echoed these media analysts' thoughts. The initial consumer package of $35 a month for 80 to 100 channels won’t be a big money maker.

Long-term, however, Stephenson is counting on sharply growing digital TV/video advertising for DirecTV Now.

Does this mean more addressable/programmatic TV advertising that AT&T has been touting for sometime? You would think so. Stephenson said: "We'll have some unique viewership data. The advertising opportunity is fairly significant."

For its part, CBS is still not in the DirecTV Now package -- though Les Moonves, chairman/CEO of CBS Corp., the day before said at the same media conference that the companies were still negotiating.

He also chimed in about the initial business health of DirecTV Now.

“They’re going to lose money on it initially … There’s no way it can last a whole long time at $35 for 80 channels.” Right now, Stephenson said, DirecTV Now is “exceeding expectations.” He didn’t go into details.

As far as the threat of cannibalization is concerned, DirecTV Now is eating into DirecTV’s traditional satellite-delivered pay TV service. Stephenson said this was good news; some are looking at the new digital media business poised for success.

Much of the upside advertising promise isn’t just as a new long-term digital media packager of linear TV networks. AT&T also puts a lot of long-term value in its yet-to-be-approved acquisition for Time Warner.

Just “wired” into the home isn’t enough. It’s what is inside -- premium content -- that matters.

And owning that content -- now with Turner ad-support cable networks, including CNN, TBS, TNT, and truTV -- AT&T can leverage those outlets, perhaps with its general advertising TV ad sales for other DirecTV Now inventory.

When it comes to like-minded media competitors, we can only think of Comcast, which is in similar full-range of businesses to that of AT&T: Internet, pay TV service, communications, and TV/movie content and networks.

You can bet many new digital TV-video businesses from all kinds of traditional media companies will start from the same framework -- thin profit margins with blue-sky upside. Maybe advertising upside.