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Directv Now is a totally separate product. There will be something that is (supposed to be) basically identical to Directv except it is delivered via IP coming by the end of the year. That will be what Directv sells in preference to the satellite version since installation will cost less with no dish and no Genie, just clients, but the satellite service will continue to be sold and continue to be available for years to come.

Anyone who says they are "dropping satellite" in a mere few years doesn't know what they are talking about, or understand how cheap it actually is to deliver satellite service, even including replacement of aged satellites. Not that this will be necessary, Directv has a new satellite under construction and once that's in service their current fleet should be good until around the end of the 2020s. They probably believe satellite has no future after 2030, but I wouldn't count on Dish to be around then either.

slice1900 said:

Directv Now is a totally separate product. There will be something that is (supposed to be) basically identical to Directv except it is delivered via IP coming by the end of the year. That will be what Directv sells in preference to the satellite version since installation will cost less with no dish and no Genie, just clients, but the satellite service will continue to be sold and continue to be available for years to come.

Anyone who says they are "dropping satellite" in a mere few years doesn't know what they are talking about, or understand how cheap it actually is to deliver satellite service, even including replacement of aged satellites. Not that this will be necessary, Directv has a new satellite under construction and once that's in service their current fleet should be good until around the end of the 2020s. They probably believe satellite has no future after 2030, but I wouldn't count on Dish to be around then either.

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Sadly I don't trust AT&T and they can pull the plug in sat when they want to. Along with switching to Dish i am also leaving AT&T prepaid. I want nothing to do with them anymore.

Pere845 said:

Sadly I don't trust AT&T and they can pull the plug in sat when they want to. Along with switching to Dish i am also leaving AT&T prepaid. I want nothing to do with them anymore.

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Sure, and Apple could decide to quit selling the iPhone. Not sure why people don't get that the only reason AT&T paid $50 billion for Directv is because it was/is making $4 billion a year in profit, and that profit comes from their satellite offering. If AT&T only wanted it for the contracts they would have paid maybe a tenth of that - and if they did they still would have overpaid.

AT&T said that their Uverse TV contracts cost them $14/month/customer more than Directv's on average for equivalent content, and they had about 6 million Uverse TV subscribers at the time of purchase. That means they were paying about a billion a year more than they "would have" if they had Directv's size, which demonstrates how insanely stupid the idea they paid $50 billion for Directv to get their contracts is. Unless you think a 50 year payback (not including interest) is a sound investment.

slice1900 said:

Sure, and Apple could decide to quit selling the iPhone. Not sure why people don't get that the only reason AT&T paid $50 billion for Directv is because it was/is making $4 billion a year in profit, and that profit comes from their satellite offering. If AT&T only wanted it for the contracts they would have paid maybe a tenth of that - and if they did they still would have overpaid.

AT&T said that their Uverse TV contracts cost them $14/month/customer more than Directv's on average for equivalent content, and they had about 6 million Uverse TV subscribers at the time of purchase. That means they were paying about a billion a year more than they "would have" if they had Directv's size, which demonstrates how insanely stupid the idea they paid $50 billion for Directv to get their contracts is. Unless you think a 50 year payback (not including interest) is a sound investment.

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And AT&T wanted DirecTV's critical mass of subscribers, and that was the bigger share of the price (DirecTV had lower costs for programming than AT&T Uverse or FiOS). Now all that's left to do is to move over to DirecTV Now and cut costs on the satellite infrastructure, and then when DirecTVNow starts making a profit, it will be more of a profit than the sat side of the business. Even Dish is putting-down (throwing shade? he, he, he) its own sat biz in SlingTV commercials (as is DirecTV in its commercials for DirecTVNOW) to promote and get subscribers to SlingTV. Both sat cos. know the future is virtual MVPD (apps via internet) and in Dish's case, a new entrant into 5G.

Let's remember that AT&T has made several statements on the record that they want to wind down and close the sat biz, they are, in fact, setting things up for that: DirecTVNow service. From day ONE of the purchase AT&T has stated, "We didn't buy DirecTV for its satellites." There business path is no secret because they have made clear that satellite aint in their future: close down the sat biz and move to the far less costly virtual MVPD model. They have given every indication and blunt, direct, unambiguous statements of the plan to close the sat biz side and move to virtual MVPD. That has been their repeated public statement. You can search for that stuff on the internet.

DishSubLA said:

And AT&T wanted DirecTV's critical mass of subscribers, and that was the bigger share of the price (DirecTV had lower costs for programming than AT&T Uverse or FiOS). Now all that's left to do is to move over to DirecTV Now and cut costs on the satellite infrastructure, and then when DirecTVNow starts making a profit, it will be more of a profit than the sat side of the business.

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It costs them 50 cents per subscriber per month to maintain/replace the satellites. There's not a lot of savings from getting rid of satellite. Meanwhile the average revenue per month per satellite subscriber is $128, and the average monthly revenue per Directv Now subscriber is less than half that. Directv Now probably barely breaks even - despite the recent $5 hike, because programming costs the same whether it is streamed or broadcast via satellite. Why in the world would they want to convert customers paying $128/month to customers paying $60/month or whatever while giving them the same stuff? That's an insane business strategy unless you want to destroy the value of something you paid $50 billion for.

slice1900 said:

It costs them 50 cents per subscriber per month to maintain/replace the satellites. There's not a lot of savings from getting rid of satellite. Meanwhile the average revenue per month per satellite subscriber is $128, and the average monthly revenue per Directv Now subscriber is less than half that. Directv Now probably barely breaks even - despite the recent $5 hike, because programming costs the same whether it is streamed or broadcast via satellite. Why in the world would they want to convert customers paying $128/month to customers paying $60/month or whatever while giving them the same stuff? That's an insane business strategy unless you want to destroy the value of something you paid $50 billion for.

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Because DirecTV has said so on MANY occasions. It is their stated goal and desire, and it ends tremendous costs for a delivery system DirecTV views as absolutely awful in terms of cost. The 50 Cents figure you cited did NOT include the cost to build, cost to launch, and cost for launch insurance. How convenient for AT&T not to mention FULL costs of the sats. The "value" you state AT&T paid for DirecTV only becomes great once the sat side of the biz is shut down, and AT&T can keep far more of their profits by eliminating the costly sat biz side. It's about the cost to distribute the content that is KING: multiple satellite vs internet delivery. Keep in mind that these companies like AT&T are all about nickel and dimming SAVINGS. ONE CENT in increased profit is worth whatever it takes for them to get it. But still the cost at the rate you cited per subscriber per satellite still represents significant savings by itself if the sats themselves are eliminated, but there are OTHER costs to the satellite business such as the following:

Installations costs; RMA and other replacement equipment costs; manufacturing STB costs; RMA facilities that require labor force and associated costs like warehouses, etc.; truck rolls for repair that DirecTV subsidizes real full cost; R&D (hardware) costs for new generations of complex satellite STB's with quality features; R&D for hardware earth stations such as reflectors, LNBF's, switches, etc.; having to maintain a variety of software for both legacy and newest generations of boxes and systems; having to upgrade encryption, if necessary, costs millions; a change to new technology such as all MPEG4 and the associated costs of money and problems to change out--at no charge--all those STB's so subscribers continue to receive programming (as Charlie Ergen once described the change-out process as " . . . painful and costly,") and all of that (including a few I may have forgotten) is before adding the cost of satellites, their launch, launch insurance and in-orbit insurance and their eventual replacement, and the added cost of costly construction and launch of what will be back-up satellites that will spend a lot of time doing nothing but parked asleep for years that the 50 cents per sub per satellite per month does not likely reflect the TRUE associated costs which is all the costs of building, launching, and then leaving asleep in space additional satellite (probably did include in-flight control of the ACTIVE sats, but not the entire cost of sleeping sats) and the entire support infrastructure that satellite technology business (like the cable MSO) model requires such as all that was listed above. And, please, companies like AT&T play with numbers like "50 cents" per subscriber limiting the TRUE related costs just to make them selves look so much better to Wall Street and keep the stock price high.

So what are the costs of a virtual MVPD (no satellite side of business) after programming costs? To view on your big
TV like we do Satellite today: software people and coders to create and maintain the App for connected devices; servers to support live programming and cloud DVR; cost of bandwidth services to deliver programming to the backbone of the internet. All the other costs that are a part of the sat biz are eliminated and the consumer, not DirecTV, has to obtain at his or her expense, their own box (Roku, FireTV, etc. and/or mobile devices), an ISP and/or wireless provider, and that's about it. No RMA costs for DirecTV, no satellite equipment, R&D, Labor costs etc., etc., etc. for the sat biz.

And let's not forget that whether or not we can wrap our heads around it or if we just can't accept the reality, DirecTV has publicly said from day ONE, over and over that getting rid of the sat biz is exactly what they intend and want to do, and have moved to do so. $50 billion aint all that much for AT&T to buy DirecTV. In fact, there was $80 billion more left over to buy Time/Warner. I like the satellite tech, but it is a fact of life that BOTH sat companies see virtual MVPD as the future, but I do think Dish will still keep the sat side of business because DirecTV has made no secret their plans to LEAVE the sat biz, and primarily to provide service to rural area--at least until Dish's and AT&T's 5G comes to rural America.

DishSubLA said:

The 50 Cents figure you cited did NOT include the cost to build, cost to launch, and cost for launch insurance. How convenient for AT&T not to mention FULL costs of the sats.

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I believe that number was at least partially derived from what was disclosed in pre-merger DirecTV financial reports as part of the broadcast operations expenses, defined as:


Some of the launch expenses fell into the "maintaining" category, while the actual satellites themselves were grouped in with equipment depreciation along with the receivers. Of course, all of this financial reporting became far more opaque once ATT took over, so we don't have really good numbers after 2015.

DishSubLA said:

before adding the cost of satellites, their launch, launch insurance and in-orbit insurance and their eventual replacement, and the added cost of costly construction and launch of what will be back-up satellites that will spend a lot of time doing nothing but parked asleep for years that the 50 cents per sub per satellite per month does not likely reflect the TRUE associated costs which is all the costs of building, launching, and then leaving asleep in space additional satellite (probably did include in-flight control of the ACTIVE sats, but not the entire cost of sleeping sats) and the entire support infrastructure that satellite technology business (like the cable MSO) model requires such as all that was listed above.

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The last value we have for the DirecTV satellite fleet encompasses the launch of DirecTV-15, and it was reported in the 10-Q financial report ending 6/30/2015.


So we know you can rule out satellite vehicle insurance costs because they specifically tell investors the assets are uninsured. The satellites all have a service design life of 15 years, there are 20 million domestic satellite subscribers, and 13.5 million Latin America subscribers. So $2,047m / 15 years is an annual amortized expense of $136.47m. That total expense split across 33.5 million subs, is roughly $4 per year, or $0.34/mo in depreciated satellite asset value per sub.

If you add the depreciated asset value and define operating expenses (which would include the launch expenses) you still end up with less than $1 per sub per month.

DishSubLA said:

DirecTV has made no secret their plans to LEAVE the sat biz, and primarily to provide service to rural area--at least until Dish's and AT&T's 5G comes to rural America.

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ATT sees value in any video services they can sell because bundling services prevents churn on the far more lucrative wireless side. Of course, it's not all roses, because they reported that a 4.5% decline in video subscribers has pushed a 7.3% drop in revenue. From the latest ATT quarterly financial statement:



As of March 2018 their reported subscriber counts were:

Satellite 20,270
U-Verse 3,632
DIRECTV NOW 1,467

With DIRECTV NOW rounding up 5.8% of the subscriber base (and growing), they're bleeding revenue even faster than they're bleeding subscribers.

Sounds like an awesome strategy.

References:
Morningstar Document Library

Morningstar Document Library

SpaethCo said:

I believe that number was at least partially derived from what was disclosed in pre-merger DirecTV financial reports as part of the broadcast operations expenses, defined as:

These expenses include broadcast center operating costs, signal transmission expenses (including costs of collecting signals for our local channel offerings), and costs of monitoring, maintaining and insuring our satellites. Also included are engineering expenses associated with deterring theft of our signal.​

Some of the launch expenses fell into the "maintaining" category, while the actual satellites themselves were grouped in with equipment depreciation along with the receivers. Of course, all of this financial reporting became far more opaque once ATT took over, so we don't have really good numbers after 2015.

The last value we have for the DirecTV satellite fleet encompasses the launch of DirecTV-15, and it was reported in the 10-Q financial report ending 6/30/2015.

At June 30, 2015, the net book value of in-orbit satellites was $2,047 million, all of which was uninsured.​

So we know you can rule out satellite vehicle insurance costs because they specifically tell investors the assets are uninsured. The satellites all have a service design life of 15 years, there are 20 million domestic satellite subscribers, and 13.5 million Latin America subscribers. So $2,047m / 15 years is an annual amortized expense of $136.47m. That total expense split across 33.5 million subs, is roughly $4 per year, or $0.34/mo in depreciated satellite asset value per sub.

If you add the depreciated asset value and define operating expenses (which would include the launch expenses) you still end up with less than $1 per sub per month.



ATT sees value in any video services they can sell because bundling services prevents churn on the far more lucrative wireless side. Of course, it's not all roses, because they reported that a 4.5% decline in video subscribers has pushed a 7.3% drop in revenue. From the latest ATT quarterly financial statement:

Video entertainment revenues decreased $661, or 7.3%, in the first quarter of 2018, largely driven by a 4.5% decline in linear video subscribers. Our over-the-top video subscriber net adds more than offset our decline in linear video connections. However, this shift by our customers, consistent with the rest of the industry, from a premium linear service to our more economically priced over-the-top video service has pressured our video revenues. Also contributing to the decrease was the impact of newly adopted accounting rules, which resulted in less revenue allocated when video services are bundled with other offerings. Churn rose for subscribers with linear video only service, partially reflecting price increases.​

As of March 2018 their reported subscriber counts were:

Satellite 20,270
U-Verse 3,632
DIRECTV NOW 1,467

With DIRECTV NOW rounding up 5.8% of the subscriber base (and growing), they're bleeding revenue even faster than they're bleeding subscribers.

Sounds like an awesome strategy.

References:
Morningstar Document Library

Morningstar Document Library

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These disclosures/quarterly earnings reports are for the peasants: careful not to offend the SEC, but of no value to the REAL investors out there. It's all prose designed to create a safe,. calm place to invest your money or keep your stock rather than sell it, and there have been incidents when corporations to have been caught printing one thing in those pretty, coffee table editions of their annuals and quarterlies that was not an accurate depiction of the reality. Those publications and disclosures are all about covering butt and complying with the law so Goober who fancies himself a savvy investor just because he watches CNBC all day are reads those pretty reports while emptying the contents of his colon, with printed statement by the lawyers saying pretty much that whatever you read in the pretty book, may not be the case at the day after printing, so as to have cover with the SEC.

Ironically, it is the quarterly conference calls that are often the source of frank, sometimes honest, and even contrary to the content in the pretty book published last quarter, where revelations of the real plans and intentions are revealed and sometimes from fairly tough questions asked that provoke stark differences from what as published in the pretty book. Of course they say " . . . see any value in video services" because no company is going to say in disclosures or reports to the rabble that they see very little value in the long term to "a particular" video service, certainly not satellite. That disclosure is about the short term game: they still advertise DirecTV to gain subscribers because in the long run, AT&T is better off having as many potential satellite subscribers NOT subscribing to Dish instead, and DirecTV in the long run can transition as many of its subscribers over to the far less costly DircTVNow, especially as DirecTV's goal is to have their virtual MVPD to be as close to the satellite experience as possible, and they have years in which to achieve that.

But still, when AT&T states that they will and are working to end the satellite side of the business and make statements like, "we didn't buy DirecTV for its satellites," in response to why AT&T is going so all-in for the virtual MVPD model: DirecTVNOW, we have to accept the words coming out of the company officers mouths because it has proven far more accurate a truth than anything printed and published in those beautiful, fat, coffee table edition earnings reports for the Mules to display proudly as decoration for all their friends to notice. And yet, companies have tanked after publishing what was such a rosy picture of the company page after page--Oh, with that often obscure legal disclaimer warning that you had best not believe in Santa Claus because he wrote that beautiful coffee table edition of the Earning Report in your hands now, along with a litany of all sorts of problems and losses that can occur despite all the numbers and graphs indicate contained within this limited edition, proudly displayed upon your coffee table Earnings Report and prospectus.

So what. Despite how great a person may seem on paper, like a resume, if, at the interview,that person says from his own mouth that he doesn't possess the skills for the job for which he is applying, hates having to go to work each morning and that you should jump in the lake: which are you going to believe, the resume or what he just said out of his own mouth?

DishSubLA said:

The 50 Cents figure you cited did NOT include the cost to build, cost to launch, and cost for launch insurance.

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Yes it does. Directv doesn't release exact information on the cost of building/launching their satellites, but it can be inferred from the costs given for similar satellites - about $400 million per satellite, and they last a little over 20 years, which comes out to about $1.5 million per month over the life of the satellite. They have a little over 20 million subscribers now, which means each satellite costs less than 10 cents per month per subscriber. Going forward they only need five (D11/D14 @99, D12/D15 @103, T16 @101) so that's maybe 40 cents per subscriber per month. The rest is the cost for maintaining them (i.e. tracking/control/etc. and maintenance on ground stations)

People see eye watering large numbers for the cost of satellites and think that costs a ton, but those costs are divided across 20+ million satellite subscribers. What really matters though is that Directv probably never needs to launch another satellite after T16 is in orbit, because they'll be good through the end of the next decade. If they figure out one of them will run out of fuel in 2030, yeah there's no way they'll launch another one, that's when satellite goes away. It would make no sense at all to shut it down before then; the satellites in orbit are a sunk cost.

If AT&T told people how much they're investing in the infrastructure to deliver Directv Now, and the future IP version of Directv, they'd probably see those numbers and think how can they afford that they should stick with satellite!

DishSubLA said:

But still, when AT&T states that they will and are working to end the satellite side of the business and make statements like, "we didn't buy DirecTV for its satellites," in response to why AT&T is going so all-in for the virtual MVPD model: DirecTVNOW, we have to accept the words coming out of the company officers mouths

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When you get to companies the size of DirecT&T/Warner, it's sadly not all that uncommon for senior management to get out of sync with the technical capabilities of their organization. I think it's easier to sell that as being the future when we can stop being excited about "record breaking" streaming numbers of 2 million unique viewers.

Fox set a streaming record during the World Cup on Monday

slice1900 said:

If AT&T told people how much they're investing in the infrastructure to deliver Directv Now, and the future IP version of Directv, they'd probably see those numbers and think how can they afford that they should stick with satellite!

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The really important part is the costs scale linearly. 100 streams require 100x the bandwidth and server capacity of 1 stream. Bandwidth overall is getting cheaper, but it takes expensive compute with tons of memory and SSD for caching to be able to serve up rate-adaptive HLS streams effectively. That's why almost all the players (Sling, Hulu, FOX, DirecTV, Playstation Vue, Philo, etc) are all outsourcing their CDN infrastructure to Akamai, Level(3), and Fastly. As of right now, Netflix remains the only large mainstream provider (ie, not Pornhub) who owns and operates its own CDN infrastructure for purposes of single-tenant video distribution.

I canceled, though it took a few calls to get it done because the first rep said the system was down and gave me another number to call. Called them and they tried to keep me, even though I said I didn't want to stay. Then I found out my refund is via a Visa gift card and I was like WTF. Do I send you Visa Cards when I pay? So now I will be getting a $100+ visa gift card that better not have freaking fees...
Thanks for a great forum. The last 8 or so years have been good and thanks for all the insight...

I think Amazon will own everything in 10 years anyway. And we will just d/l anything we want to watch with Prime for $200 a month.....

SpaethCo said:

When you get to companies the size of DirecT&T/Warner, it's sadly not all that uncommon for senior management to get out of sync with the technical capabilities of their organization. I think it's easier to sell that as being the future when we can stop being excited about "record breaking" streaming numbers of 2 million unique viewers.

Fox set a streaming record during the World Cup on Monday

The really important part is the costs scale linearly. 100 streams require 100x the bandwidth and server capacity of 1 stream. Bandwidth overall is getting cheaper, but it takes expensive compute with tons of memory and SSD for caching to be able to serve up rate-adaptive HLS streams effectively. That's why almost all the players (Sling, Hulu, FOX, DirecTV, Playstation Vue, Philo, etc) are all outsourcing their CDN infrastructure to Akamai, Level(3), and Fastly. As of right now, Netflix remains the only large mainstream provider (ie, not Pornhub) who owns and operates its own CDN infrastructure for purposes of single-tenant video distribution.

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Bandwidth costs do not scale linearly, especially when you are talking about CDNs. The more bandwidth you push across Akamai, etc., the less it costs you per GB, TB, etc. If your CDN (or backbone provider for that matter) is charging you the same rate for 100TB per month as they are for 100PB per month, you're doing it very wrong.

Also, Amazon has their own CDN too.