AT&T Joins The Race For Cheap, Linear TV Services

Cheap, low-cost linear TV services don’t seem to be a fad. Now, AT&T is looking to start one up. Will it really make it a significant part of its business?

Like others that have announced low-cost plans, AT&T’s effort, called AT&T Watch, will consist of a number of non-sports cable TV networks. Sports programming on TV networks can have costly license rights fees -- which are passed on to consumers.

During its U.S. Justice Department case against the AT&T-Time Warner merger, Randall Stephenson, chairman/CEO of AT&T -- while on the witness stand -- talked up this new service, which will cost $15 a month and will be free to AT&T Wireless consumers.

To be fair, some big spin was at work -- pushing the merger as consumer-friendly. But to do this, other businesses need to underwrite new TV businesses -- thus the connection with AT&T’s wireless business.



Now, think about the news earlier that week  -- that Amazon Prime -- the e-commerce retailer -- announced that it has 100 million U.S. retailer customers. The question is how many of these consumers also get Amazon Prime Video, its on-demand service. Right now, Amazon is not offering any low-cost video service. But there is overall savings in becoming an Amazon Prime customer, including free shipping.

Recently, non-sports cable networks -- Discovery Inc., Scripps Network Interactive, Viacom, and A+E Networks -- realized they needed to find a way to ensure their networks get new virtual live, linear pay TV services and then offer them cheaply to consumers.

Last fall, they announced a plan to be part of Philo, a new national digital TV service, first launched at Harvard in 2009. Philo will have more than 35 channels costing consumers $16 a month. Another plan offers 46 channels for $20.

To keep the cost low, Philo has no sports programming component. Other services, like Dish Network’s Sling TV, also have packages without sports content.

AT&T owns DirecTV, where customers can buy a full-priced satellite TV service -- around $80 to $125 or more. Also, DirecTV Now, a lower-priced virtual pay TV provider, is priced anywhere from $40 to $50; AT&T Watch is charging just under $15.

No one knows where this is headed. The best strategy: Have a variety of price points, then let customers decide.

But all this won’t remain stagnant, as was the case for the young cable TV industry in the 1980s. New digital pay TV services may be cheap now. But will they remain that way?

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