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College Hotline - Pac-12 Networks: AT&T’s shift to DirecTV away from U-verse and what it...

Discussion in 'CU Buffs Newsroom' started by RSSBot, Feb 24, 2016.

  1. RSSBot

    RSSBot News Junkie

    Jul 8, 2005
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    I don’t want to assume everyone has heard or read the news, so here’s a quick recap:

    As one analyst put it, via Bloomberg: “AT&T is going to actively get out of the U-verse business.”

    If you’re a U-verse subscriber who watches the Pac-12 Networks – count me in that group – then the development is cause for, if not concern, then at least curiosity.

    If you have a vested interest in the future success of the Pac12Nets — everyone at the conference office and on the campuses — then the development is also cause for, if not concern, then at least curiosity.

    I’ve attempted to gain some clarity on the situation. Not surprisingly, there’s a considerable amount of nuance.

    We’ll start with the bottom line: The situation isn’t awful for the Pac-12 in the near term, but it’s not good.

    Not. Good. At. All.

    Critical point: U-verse subscribers need not panic. AT&T isn’t pulling the U-verse plug in a few weeks or months (and maybe not in a few years).

    Instead, it’s de-emphasizing U-verse, as one industry source put it, and pushing both current and potential customers to DirecTV.

    According to a statement from AT&T:

    “To realize the many benefits of our DirecTV acquisition, we are leading our video marketing approach with DirecTV. However, our first priority is to listen to our customers and meet their needs, and if we determine a customer will be better served with the U-verse product, we offer attractive and compelling options.”

    The shift makes sense: Moving video content to DTV (satellite transmission) frees up pipe space that will allow AT&T to provide faster (more lucrative) internet service.

    What happens to U-verse five years from now is anyone’s guess. But in the near term, U-verse customers will have the option to remain U-verse customers.

    Obviously, the situation isn’t good for the conference: AT&T is pushing potential subscribers away from a Pac12Nets carrier (U-verse) to a Pac12Nets non-carrier (DTV).

    And what of the economic component? Here’s my sense:

    There are roughly 12 million subscribers to the Pac12Nets. The U-verse contingent is in the 800,000 – 900,000 range.

    If we assume 90 percent of the U-verse subscribers are in-market paying 80 cents per month and 10 percent are out-market paying 25 cents, then U-verse accounts for $8 million (approx) annually for the Pac12Nets.

    That’s less than 10 percent of the total annual revenue, but it’s not an insignificant amount for an entity that’s sending just $1 million (approx) back to the campuses.

    Given AT&T’s plan, the Pac12Nets probably can’t count on many new subscribers via U-verse – not that there is a mass of untapped customers out there. (Chances are, if you want the Pac12Nets, you’ve got them; if you haven’t switched from DTV to a Pac12Nets carrier, you aren’t planning to.)

    For the most part, the subscription and revenue numbers are what the subscription and revenue numbers are.

    Except for this:

    It strikes me that in order for AT&T to lure customers to DTV, it will have to drop the price. After all, AT&T is now seeking subscribers for DTV who have already chosen a different carrier.

    Maybe I’m dead wrong, but what better way to compel that pool of consumers to make the switch than by dropping the price?

    And if the price of DTV drops for customers, it stands to reason that the potential profit from a DTV carriage deal for the Pac12Nets would also … um … drop.

    The carriage the conference desperately needs in order to ramp up income for the campuses might not be as lucrative as everyone had hoped — if it ever happens in the first place.

    Again, I’m hardly an expert on such matters, and there could very well be a flaw in the reasoning here.

    But it sure seems like there are a lot of scenarios for Pac12Nets/U-verse/DirecTV interplay … and most of them aren’t promising for the conference.

    Then there’s the not insignificant matter of what happens when the Pac-12’s contract with AT&T expires. (I don’t know the exact date but believe there are a few years left on the deal).

    Seems like we’re headed down one of two paths in the not-too-distant future: Either the Pac12Nets are on DTV at a reduce income level, or the Pac12Nets are not on either DTV or U-verse.


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