• by Alex Weprin , October 13, 2017

In a filing with the Securities and Exchange Commission this week, AT&T said it expected to lose approximately 390,000 pay TV subscribers in its U-Verse and DirecTV units.

While that news certainly paints a grim picture for the future of traditional TV bundles, the filing also noted that the company added 300,000 subscribers to its DirecTV Now OTT streaming service.

The challenges facing AT&T are in some way emblematic of the subscription video business overall.

As AT&T noted in the filing: “The video net losses were driven by heightened competition in traditional pay TV markets and over-the-top services, hurricanes and our stricter credit standards.”

As the traditional bundle continues to increase in price, skinnier, cheaper streaming bundles are taking their place. For companies like AT&T and Dish, which sell both traditional and streaming bundles, this shift presents an incredible new opportunity, as well as fresh concerns.

On the one hand, any consumer with an internet connection is now a potential customer, and the lack of dedicated hardware means signing up is fast and easy. As AT&T noted in its filing, the number of customers signing up for its streaming service is now in the hundreds of thousands per quarter, making it a very real business.

On the other hand, these new services are much smaller, and therefore less lucrative than the bundles they replace.

In addition, the ease of signing up is matched by the ease of canceling the service, enabling consumers to shift to a different streaming bundle far more easily than they could if moving from satellite TV to cable, and the hardware change that would entail.

Still, as streaming bundles continue to rise, the opportunities they present may offset the short- and medium-term challenges. As cable companies continue to primarily invest in their dedicated regions, companies like AT&T and Dish, as well as new streaming services from Sony, Hulu and others, can attempt to gain a national footprint, perhaps giving them a leg up over companies that currently dominate the video marketplace.

As media buyers scour the OTT landscape looking for players with a national footprint and significant scale, these new bundles could fit that bill quite nicely.