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> AT&T has retreated from competitive pricing and said goodbye to more than 2.3 million TV subscribers in the past year. I know that accounting-wise this "make

> AT&T has retreated from competitive pricing and said goodbye to more than 2.3 million TV subscribers in the past year. I know that accounting-wise this "makes sense," but marginal costs after rolling out the physical network are pretty close to zero, right? How is shedding 2.3 million TV subscribers a profitable move?

bluedevil2k 7y ago
If the price increase is greater (30%) then the customers shed (5-10% I’m estimating), then it’s profitable.
- neogodless 7y ago
  According to that TechCrunch article, AT&T only has 1.3 million subscribers left. So they lost more than half. The math is not making sense to me. (Unless they lose money on every subscriber, and were hoping to make it up with volume! Ha!)
  - bluedevil2k 7y ago
    No, I think they said they have 1.3M subscribers at that price tier and the price increase is only affecting them. And to go back to your original point, each additional customer does create variable costs. At&t has to pay carrier fees for every subscriber. A customer pays $6/month for ESPN, $0.60 for NatGeo, etc. Maybe the old price tier wasn’t covering the carriage fees + equipment + labor to install
jcampbell1 7y ago
Cable tv content is expensive. It is extremely high marginal cost. A $60 plan may have $55 in content expense. Internet on the other hand....
- ghaff 7y ago
  It is. Especially sports which is one thing that keeps a lot of people on cable (or satellite). However, I do suspect that as the number of cable TV cord cutters continue to rise, you're left with more and more customers who are less price sensitive and more set in their ways. So it's really not a bad strategy to just give up trying to compete on price and milk an existing customer base for as long as you can. You're going to lose the people who are ready to move to online streaming and just haven't gotten around to it soon enough anyway.
mbreese 7y ago
If their programming costs are getting higher, then raising prices for a smaller number of customers could be the more profitable move. Particularly if the customers they are losing have more support costs (which I think was also an argument of AT&Ts). But, it's really hard to figure any of this out when talking about ATT. They have 4 (at least) different ways to sell TV service (DirecTV satellite, AT&T TV, AT&T TV Now, and AT&T Watch TV). If those names aren't confusing enough, then I'm sure they still sell U-Verse service somewhere too. Each of these services was/is losing customers, but at different rates. And the cost for each service varies a lot too, as does the programming available. I actually subscribe to AT&T TV Now, but I'm on a grandfathered programming package that isn't available any longer. Who knows how many other grandfathered packages exist between the varied services. The price hike reported here is for the AT&T TV Now service, which was their older IP TV offering. It's been a pretty open secret for a while that they have been trying to get as many people off of that service and moved over to the (more expensive) AT&T TV service as possible.

bluedevil2k 7y ago

If the price increase is greater (30%) then the customers shed (5-10% I’m estimating), then it’s profitable.

neogodless 7y ago
According to that TechCrunch article, AT&T only has 1.3 million subscribers left. So they lost more than half. The math is not making sense to me. (Unless they lose money on every subscriber, and were hoping to make it up with volume! Ha!)
- bluedevil2k 7y ago
  No, I think they said they have 1.3M subscribers at that price tier and the price increase is only affecting them. And to go back to your original point, each additional customer does create variable costs. At&t has to pay carrier fees for every subscriber. A customer pays $6/month for ESPN, $0.60 for NatGeo, etc. Maybe the old price tier wasn’t covering the carriage fees + equipment + labor to install

jcampbell1 7y ago

Cable tv content is expensive. It is extremely high marginal cost. A $60 plan may have $55 in content expense. Internet on the other hand....

ghaff 7y ago
It is. Especially sports which is one thing that keeps a lot of people on cable (or satellite). However, I do suspect that as the number of cable TV cord cutters continue to rise, you're left with more and more customers who are less price sensitive and more set in their ways. So it's really not a bad strategy to just give up trying to compete on price and milk an existing customer base for as long as you can. You're going to lose the people who are ready to move to online streaming and just haven't gotten around to it soon enough anyway.

mbreese 7y ago

If their programming costs are getting higher, then raising prices for a smaller number of customers could be the more profitable move. Particularly if the customers they are losing have more support costs (which I think was also an argument of AT&Ts). But, it's really hard to figure any of this out when talking about ATT. They have 4 (at least) different ways to sell TV service (DirecTV satellite, AT&T TV, AT&T TV Now, and AT&T Watch TV). If those names aren't confusing enough, then I'm sure they still sell U-Verse service somewhere too. Each of these services was/is losing customers, but at different rates. And the cost for each service varies a lot too, as does the programming available. I actually subscribe to AT&T TV Now, but I'm on a grandfathered programming package that isn't available any longer. Who knows how many other grandfathered packages exist between the varied services. The price hike reported here is for the AT&T TV Now service, which was their older IP TV offering. It's been a pretty open secret for a while that they have been trying to get as many people off of that service and moved over to the (more expensive) AT&T TV service as possible.