Subscriber losses have come to be expected in the legacy pay-TV space. Cable and satellite subscriptions are less popular with consumers every year. Speaking broadly, you can connect the cord-cutting phenomenon with the rise of streaming alternatives to cable and satellite live and on-demand offerings. It's a little simplistic to say that Netflix and other streaming services are "killing cable," but there's some truth to the idea.

Legacy pay-TV companies are not standing pat, though. DISH Network is among the legacy pay-TV companies to enter the live-TV streaming space, where so-called "skinny bundles" work to edge out the old-school competition with slimmed-down channel bundles and (in theory, anyway) slimmer prices. Since its merger with DIRECTV in 2015, AT&T (NYSE:T) has made its fair share of streaming moves, too. AT&T's offerings include a live-TV streaming service called AT&T TV NOW (it was previously known as DIRECTV NOW), a direct-to-consumer HBO streaming service called HBO NOW, and an upcoming on-demand service called HBO Max. And now, AT&T is moving to offer the most cable-like streaming service on the market. Which raises the question: Why? What's the point of this service? Does it benefit consumers more, or AT&T?

Scissors cut a cable in front of cash

Image source: Getty Images.

What has AT&T been doing?

AT&T has been busily rebranding its various offerings, so it's important to clarify what I'm talking about here. AT&T has replaced brands like U-Verse and DIRECTV NOW with various brands using the construction "AT&T [thing]" -- AT&T Internet is the new U-Verse, for example.

AT&T has two very similar-sounding live-TV brands. AT&T TV NOW is the new name for DIRECTV NOW, a live-TV streaming service that works in much the same way as skinny bundle peers like DISH's Sling TV, Disney's Hulu + Live TV, YouTube TV from Alphabet's Google, and others.

Meanwhile, AT&T TV (without the "Now") is a new pay-TV service that is positioned more like a cable or satellite service -- but it, too, will stream over the internet.

AT&T TV is in the process of rolling out in select markets. Customers who can get it will find that the deal works much as cable contracts do: A promotional rate applies to the first year of service, and subscribers are locked into a two-year contract. That's in contrast to AT&T TV NOW and the rest of the live-TV streaming set, which operate on a month-to-month basis and allow customers to cancel at any time with no penalty.

AT&T TV is also tied to a device in a way that most live-TV streaming services are not. AT&T is distributing its own streaming device to customers. Getting additional streaming boxes for additional TVs will cost customers extra. If this sounds familiar, it's because it's pretty much exactly how cable boxes work.

From the consumer's perspective, this is bound to feel more like a legacy pay-TV service than a skinny-bundle live-TV streaming service. The technology here is different from legacy pay-TV -- AT&T TV streams over the internet instead of being delivered via traditional cable or satellite means and infrastructure -- but the experience is essentially the same, right down to what is, in all but name, a cable box.

High hopes for AT&T TV

Flipping from traditional infrastructure to streaming has its advantages. AT&T can deliver mobile viewing in the same way that it delivers the at-home experience. The company could sell this new service in areas where it lacks cable infrastructure and wage war on its fellow phone, TV, and internet companies (for now, the service is available only in 15 cities). But even those positives can't help but expose the fact that this is a "cord-cutting" option only by the most technical definition.

Yet AT&T seems to think that this service could take off even as cable and satellite services fail. In AT&T's fourth-quarter 2019 earnings call last month, John Stankey, president and chief operating officer of AT&T and chief executive officer of Warner Media, predicted that AT&T TV will, along with offerings like HBO Max, lead to "year-over-year improvements in subscriber losses" for AT&T.

How much AT&T TV will actually play a role in such a comeback remains to be seen. It's worth remembering that pay-TV customers did not wake up one day and want their TV to be streaming instead of live; they migrated to streaming because it offered a better deal. The perks of streaming included some of the conveniences that AT&T TV will give AT&T's pay-TV offerings, but a huge part of the equation was -- and remains -- financial. AT&T TV packages range from $49.99 per month to $69.99 per month for the first year and cost more in the second year of the contract. The basic package reportedly will cost $93 per month in the second year and the high-end package jumps to $135 per month. There is also a $19.95 activation fee and a monthly fee for packages with regional sports networks. 

What's the point?

If AT&T TV is a pay-TV service in all ways but one, then why does it exist? Train travel is more comfortable than plane travel, but planes would not become any more popular among consumers if airlines slapped wheels on them and stuck them on tracks with problems like limited legroom, lengthy security lines, and lousy food options still intact.

Streaming is beating legacy pay-TV, but not because of the back-end technology that consumers neither see nor, for the most part, care about. AT&T TV appears to miss this point. So what makes it better than AT&T's legacy pay-TV option, DIRECTV Now?

From a consumer perspective, not much. But AT&T will see a difference. Speaking at December's Barclays Global TMT Conference, AT&T CEO Jeff McElfresh had this to say:

I'm excited about this product because I think of it as a CapEx [capital expenditure]-light product. Acquisition costs are about half of what the legacy satellite product enabled. And the content and the programming lineup is every bit as good and the user experience is future-leaning.

A "future-leaning" user experience is a pretty vague concept, but there's a clear dollars-and-cents argument here, too: Without satellite dishes to worry about, AT&T TV is much cheaper to get into customers' homes.

This doesn't exactly mean that AT&T TV is a foolproof idea; the service still seems to lack clear benefits for customers that differentiate it from its legacy pay TV predecessors and competition. But if this style of pay TV is going to continue to struggle, AT&T should at least find ways to save some money in providing it. With AT&T TV, the company has done just that.