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AT&T Takes Aim at Cable Providers With Its Upcoming Video Streaming Service

By Chris Neiger – Mar 9, 2016 at 12:12PM

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AT&T is using the DIRECTV brand to offer online-only content options.

Source: DIRECTV.

AT&T (T 1.42%) is no stranger to online video. The company says about 60% of its network traffic comes from video right now. But right on the heels of its acquisition of DIRECTV, the company is planning an even bigger play in the video space. 

The wireless and wireline Internet provider announced three new online video streaming packages that it'll launch through DIRECTV at the end of this year. 

The packages won't require contracts, won't have set-top box purchases, won't have satellite dishes, and some of them will offer both live TV and premium channels. Basically, it's a nightmare for the cable industry.

Here are some of the package details: 

  • DIRECTV Now: This will be the top-tier package that includes most of the content that DIRECTV offers. The service will have both on-demand and live programming, with the option to add premium channels (no news yet on which channels those will be).
  • DIRECTV Mobile: This will be a cheaper option specifically for smartphones. AT&T says it'll include "premium content" and that customers won't have to be AT&T Wireless subscribers to get it.
  • DIRECTV Preview: The last option is a free, ad-supported package that will have less content. AT&T already said that its AUDIENCE Network and Otter Media will be available through this option.

The company says that these packages won't change anything for its traditional DIRECTV service, and will still offer satellite packages as usual. And all of the packages will be available to anyone, regardless of their wireless service or Internet service provider.

AT&T's CEO of entertainment John Stankey said in a press release: "These new video subscription models reflect the flexible content choices, viewing options and simple, transparent pricing that consumers want. AT&T intends to be the first company to deliver that flexibility, along with an effortless customer experience."

It's worth noting that while Stankey said the pricing will be transparent, the cost of the packages won't be available until they launch in the fourth quarter of this year. 

Taking on cable
AT&T's new streaming services will offer yet another option for a growing population of cord-cutters and cord-shavers. 

Cable providers and their networks are already feeling the pinch from these changes. Disney (DIS 3.36%) said that ESPN has lost 7 million subscribers over the past two years because of the so-called skinny bundles (video packages with less content and cheaper prices).

AT&T could also square off with DISH's (DISH 2.36%) Sling TV, which is a no-contract, online video option the satellite provider sells. It comes with about 20 channels for $20, includes EPSN, TNT, AMC and others, and users can even add premium channels for $5 more per month. 

With services like Sling TV and AT&T's upcoming packages, users will have much cheaper options for video content than the cable providers offer -- and that's the exact opposite direction the cable companies are moving in. The average cable bill price has grown nearly 6% each year since 1995, and currently sits at a monthly average of $123.

Foolish final thought
As users continue looking for alternative video services, AT&T is definitely moving in the right direction with its new offerings. Reasonably priced tiers will likely be the key to success, along with offering the right channels. 

It's a bit premature to say how well AT&T's new video services will do, since we don't yet know the channel details or pricing. But I think AT&T's getting into this market at the right time and could be poised to benefit from a growing demand for online video at inexpensive prices. 

Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Walt Disney. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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