It's no secret that AT&T's (NYSE: T) DirecTV live streaming service has been struggling to hold onto customers, and a new survey from UBS sheds even more light on the fact that users prefer other streaming services to DirecTV.
The UBS Evidence Media Lab Consumption survey polled 2,000 respondents and found that of those who were considering signing up for a live TV streaming service, most preferred Hulu's service, followed by YouTube TV by Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) Google. Finally, taking the third spot, was AT&T's DirecTV. UBS predicts that Hulu and YouTube TV will have more subscribers than streaming TV services provided by DirecTV and other traditional providers by 2020.
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What's also troubling for AT&T is the fact that survey respondents are more willing to cancel traditional TV services, which AT&T also offers through its U-verse service, than in the past. Among respondents, 20% were planning on canceling traditional TV in the next year, a big jump from 11% in the previous survey.
It's usually smart to take some of these surveys with a grain of salt, but in the case of AT&T, the responses confirm the telecom's own quarterly data, which show subscribers are leaving the company's TV services in droves.
AT&T's results track with the survey findings
AT&T reported its fourth-quarter 2019 results at the end of January. Over the three-month period ending in December, the company lost 267,000 DirecTV Now subscribers, and its traditional video subscribers were down 391,000 overall.
The company's management noted on the recent earnings results conference call that a lot of customer losses in the quarter were due to low-value, high-churn customers leaving the platform after heavily discounted promotions were over.
While true, that doesn't paint a complete picture of AT&T's customer retention problem. Consider that in the third quarter, AT&T lost a total of 297,000 total video customers.
In short, AT&T's results from the past two quarters show that many users are already ditching the company's services, confirming the survey's results that TV users aren't as interested in AT&T's offerings.
Can AT&T's TV services bounce back?
AT&T is focusing a lot of its attention on lowering its debt after its $85 billion purchase of Time Warner last year. That acquisition gave the company tons of valuable video content. That's a smart move overall, but it means that AT&T may be less likely to put additional resources toward its struggling television services until it pays down some of its debt load.
Additionally, AT&T's wireless services are the company's most significant revenue drivers, which means that any focus on growing the company's top and bottom lines will most likely be directed to improving its wireless position. And AT&T is already very focused on building out a 5G network to keep pace with its rivals' moves into the next wireless standard. Just as 4G ignited massive competition among carriers, these companies are looking to their growing 5G networks to set themselves apart.
As AT&T pays down debt and focuses attention the ultra-competitive wireless segment, and at it becomes clearer that TV users prefer Hulu and YouTube TV, it's likely that AT&T's TV streaming services will continue to struggle.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). The Motley Fool has a disclosure policy.