DirecTV Now, to be officially announced at an event in midtown Manhattan, will go head to head with Dish Network's (DISH - Get Report) SlingTV and Sony's (SNE - Get Report) PlayStation Vue. In the coming weeks, they'll be joined by Alphabet's (GOOGL - Get Report) Google Unplugged and a similar service from Hulu.
The new service is expected to offer three tiers each aimed at a slightly different segment of the roughly 20 million to 25 million households that don't subscribe to any pay-TV service. In general, the target audience is young people and especially those in urban areas where AT&T satellite TV service DirecTV, which it acquired in 2014, has historically lagged its cable TV rivals.
According to a source close to the rollout, none of DirecTV's three tiers will attempt to replicate SlingTV's strategy of selling a so-called "skinny bundle" of 25 to 40 channels for $20 to $25 per month. Instead, AT&T plans to emphasize a 100-channel offering for $35 per month, a facsimile of the traditional pay-TV bundle with a user-friendly interface.
That's important given that Google Unplugged and Hulu are both expected to offer similarly priced packages with a similarly large number of channels. Whichever service is easier to use likely will win the race for online TV supremacy.
Of AT&T's three tiers, DirecTV Free View will be ad-supported and aimed at its wireless subscribers. The platform will offer a variety of shows and some networks as an add-on to existing customers.
A second tier, DirecTV Mobile, will be built for iPhones, Android devices and their kin, offering users the kind of video on-demand that younger audiences generally embrace. The third, the flagship DirecTV Now, will offer the 100 channels at $35 per month that Stephenson teased last month in hopes of easing consumer concerns that its $86.5 billion Time Warner (TWX) acquisition would mean a higher price for home entertainment.
As for content, DirecTV Now will include networks owned by Disney (DIS - Get Report) , Comcast's (CMCSA - Get Report) NBCUniversal, Viacom (VIAB - Get Report) , Starz (STRZA) , Scripps Networks Interactive (SNI) and Discovery (DISCA - Get Report) . Time Warner's HBO as well as TBS, TNT and CNN are likely to get high profiles, and as of last week, 21st Century Fox (FOXA) also has come on board.
Conspicuously absent is CBS (CBS - Get Report) . CBS wouldn't comment on DirecTV Now, but if CEO Leslie Moonves' recent statements are any indication, the company appears content to sell its programming through its online streaming service, CBS All Access, which recently surpassed the 1 million subscriber mark. CBS also has not signed-on with Hulu's own multichannel streaming service that's expected to be unveiled early next year. Hulu is a joint venture between Disney, NBCUniversal and Fox, with Time Warner taking a 10% stake in August.
In the coming months, AT&T is likely to tweak and reshape DirecTV Now as it learns more about what "cord-cutters" and "cord-nevers" want from online television. This is a major concern of all pay-TV providers and content creators, given that over the next year, cable TV companies and the media conglomerates that supply them with TV networks are expected to lose nearly $1 billion in revenue as customers terminate their pay-TV contracts, according to a study by cg42, a New York industry consulting firm.
The success of DirecTV Now is integral to AT&T's investment in Chernin, which recently announced a joint $500 million fund to acquire and develop video services for digital multichannel platforms. DirecTV Now also could bolster AT&T's efforts to add wireless customers by highlighting a new video-on-demand platforms.