NEW YORK—A class action lawsuit filed late last week alleges AT&T and a group of its senior executives fraudulently inflated subscriber numbers for its DirecTV Now virtual MVPD service in an effort to bolster the company’s case that Time Warner shareholders should accept its acquisition offer.

The suit, filed Sept. 13 in U.S. District Court for the Southern District of New York, names AT&T and 18 executives, including retiring AT&T CEO of Communications John Donovan and Randall Stephenson, chairman and CEO of AT&T Inc., as defendants.

The plaintiffs, including union pension funds and individuals, say the executive defendants “were motivated to heavily promote DirecTV Now until the Time Warner Acquisition closed.” Bringing together the telecom giant’s video distribution assets and Time Warner’s content library and production capabilities was promoted as a major reason the deal should go forward.

“The launch of DirecTV Now was an important test of the viability of AT&T’s side of that bargain,” the suit alleges. The new service’s success gave Time Warner shareholders a good reason to trade their stock shares for those of AT&T, it says.

However, the suit alleges DirecTV Now wasn’t “a viable product.” Commercialized before it was ready, DirecTV Now experienced “severe service issues” including “frequent interruptions, service freezing and buffering, app crashes, being automatically logged out, missing features and billing issues,” according to the suit.

The suit alleges AT&T encouraged employees to create fake customer accounts to build the illusion of robust DirecTV Now subscriber growth. The company used “highly discounted promotions” that resulted in high customer churn once promotional pricing ended and promoted “unreasonable and extremely aggressive sales quotas” for employees that pressured them into using “unnatural sales or flat-out fraudulent” sales tactics, according to the suit.

The company “taught and actively encouraged” employees to convert phone upgrade activation fees into subscriptions to the service “by waiving the fee, but charging the customer anyway, and applying the payment to up to three DirecTV Now accounts using fake email addresses without telling the customer they had been signed up for the subscription,” the suit alleges.

Sizable churn began to appear in early 2018, and by the summer of 2018 monthly reports and weekly analysis revealed that “more than 40-50%” of subscribers were cancelling once promotions ended, it says. The suit references a former AT&T employee who saw “a 35% ‘take rate’ (or, 65% churn rate) for DirecTV Now.”

According to the suit, AT&T disclosed on Jan. 30 that virtually none of the 500,000 “heavily discounted” subscribers remained with the service. AT&T also said “that DirecTV Now subscriptions in the fourth quarter of fiscal 2018 had declined by 267,000 subscribers—a stark reversal of supposed net adds in 4Q17 through 2Q18.”

The lawsuit, filed by Pomerantz LLP and Labaton Sucharow LLP, seeks a trial. The firms are seeking compensatory damages, costs and interest from AT&T if the company is found guilty of violating security laws.

According to an AT&T spokesperson, the company “plan[s] to fight these baseless claims in court.”

DALLAS—The era of DirecTV Now is over, as AT&T has announced that when it launches its new premium IP-delivered pay-TV service AT&T TV the service will have a new moniker, AT&T TV Now. This new service will be immediately available to DirecTV Now customers, as they will just need to re-accept the terms of service to continue to streaming content.

AT&T customers signed up for either AT&T TV or AT&T TV Now will be able to access the experiences through the same AT&T TV app through mobile or TVs.

The new service will be rolled out to select markets over the next few weeks; the AT&T TV app can then be downloaded through various app stores.

AT&T acquired DirecTV for $67.1 billion in 2015, but following a reported one million loss in pay TV customers in the second quarter of 2019, it appears that AT&T may be distancing itself from the satellite company.

NEW YORK—As the AT&T-Nexstar dispute continues into its third week, CBS is warning its viewers that it could be the next broadcaster in the DirecTV owner’s crosshairs.

On July 3, more than 120 Nexstar Media Group TV stations went dark for AT&T/DirecTV customers throughout the country as a result of failed retransmission negotiations. Stations in 97 markets were impacted by the blackout and the impasse continues.

Now CBS claims AT&T is not proposing a “fair market value agreement” to continue carrying its TV stations and says that CBS-owned stations in New York, Los Angeles, Chicago, Philadelphia, Dallas, San Francisco, Boston, Atlanta, Tampa, Seattle, Detroit, Minneapolis, Miami, Denver, Sacramento, Pittsburgh and Baltimore could be pulled at 11:00 PM, PT on July 19. DirecTV NOW customers nationwide would lose the CBS Television Network’s hit programming as well.

“CBS has reached timely, fair agreements with hundreds of other cable, satellite, telco and internet providers to carry our industry-leading, fan-favorite programming,” the network said in a statement. “AT&T, however, continues to propose unfair terms well below those agreed to by its competitors and may drop CBS unless we agree to those terms.”

“CBS would like to avoid being dropped, but unless an agreement is reached, our viewers should be prepared,” the statement said, adding that “AT&T’s willingness to deprive its customers of valuable content has become routine over the last few weeks and months.”

AT&T responded by saying that “Broadcast stations are the incumbents to our industry, and many feel they deserve certain entitlements. They continue to give their signals away for free but also demand unsustainably growing fees for allowing customers the convenience of receiving their channels in a usual program guide or without switching an input.”

AT&T also accused broadcasters of failing to “evolve” in the new media landscape.

“The best producers have moved aggressively into the multichannel environment and streaming to escape broadcast network and local station restrictions,” AT&T said. “And even programmers like CBS are moving their most anticipated content off the national broadcast channel and into other alternatives.

“The talent goes elsewhere, the audiences follow, and yet stations refuse to evolve, shutting off the same communities they are licensed to serve. This year, broadcasters have caused more than 200 blackouts industry-wide, which is on a record one-year pace. That’s already a more than 20 percent jump over the 165 in 2018.”

The company also called for new regulations.

“There are ways to try to eliminate these blackouts, including new legislation, and fortunately Congress has taken more interest. But the best option is to create mutually beneficial relationships with broadcasters like CBS and Nexstar through good faith negotiations.”

Despite a weekend meeting between AT&T and Nexstar to return Nexstar’s TV stations to AT&T’s DirecTV platform, the dispute continues.

On July 3, more than 120 Nexstar Media Group TV stations went dark for AT&T/DirecTV customers throughout the country as a result of failed retransmission negotiations. Stations in 97 markets were impacted by the blackout, which began at 11:59 p.m. on July 3. Both companies claim they are negotiating in good faith, however the failure from the weekend meeting didn’t stop them from continuing their war of words.

AT&T claims Nexstar wants to increase fees for carrying their local TV stations “far beyond their value.” Nexstar claims that AT&T—which recently dried the ink on an $85 billion acquisition of Time Warner—of using its newfound power within the pay-TV industry unfairly.

“A little more than a year after putting DirecTV together with Time Warner, AT&T appears intent on using its new market power to prioritize its own content at the expense of consumers, and insisting on unreasonable terms that are inconsistent with the market,” Nexstar said over the weekend.

AT&T claims that Nexstar is “reducing consumer choice” by pulling its stations from the DirecTV lineup, denying its subscribers to view free over-the-air television provided by broadcast networks that have “together lost about half their primetime audience over the past few years.”

Nexstar even accused AT&T of misrepresenting its role to regulators in past disputes with other pay-TV providers.

“The misinformation campaign began when AT&T indicated that “Nexstar pulled 120 of its local broadcast stations…” Nexstar said in a statement. “Nexstar did not pull its stations or ask for their removal from AT&T’s DirecTV, U-verse or DirecTV Now platforms. Rather, Nexstar’s offer for a 30 day extension would have allowed consumers in the affected markets to continue viewing their favorite network shows, special events, sports, local news and other programming while the parties continue negotiations.”

It also said that AT&T claimed that Nexstar had been involved in blackouts with Cox Cable, DISH Network, Charter Spectrum “and others.” “In fact, Nexstar has never had DISH Network or Charter Spectrum remove its stations from their consumer video offerings,” Nexstar said.

The dispute has prompted numerous calls from members of Congress to return the stations to DirecTV while the two companies negotiate. 

WASHINGTON—On Tuesday, June 18, AT&T filed a “bad faith” complaint with the FCC against nine TV station owners that have pulled 20 stations in 17 cities across AT&T’s DirecTV, DirecTV Now and/or U-Verse; the stations went black on May 30 and June 10. AT&T says that all the stations have shared service agreements with Sinclair Broadcast Group, which it writes in the filing appears to “manage and control” the stations; however, Sinclair was not targeted in the complaint.

The nine station groups included in the complaint are Deerfield Media, GoCom Media of Illinois, Howard Stirk Holdings, Mercury Broadcast Group, MPS Media, Nashville License Holdings, Robert Media, Second Generation of Iowa and Waitt Broadcasting.

Several of the stations affected have said that their retrans deals expired on March 31, though they continued to include their channels on the AT&T services through extensions, with Howard Stirk Holdings and Robert Media saying they offered an unconditional extension earlier this month but were rejected by DirecTV. AT&T says, however, that the nine stations have ignored individual proposals and have been refusing to negotiate “for months.”

That claim that the broadcasters are refusing to negotiate is critical in determining whether the stations are operating in bad faith. Broadcasters, while under no obligation to make deals to have their stations on MVPD services, are required by the FCC and Congress, through the STELAR Act, to negotiate in good faith.

Congress is currently considering the reauthorization of the STELAR Act, which the American Television Alliance says will end the FCC’s authority to enforce the “good faith” rules in regard to retransmission consent.

“This is another symptom of a broken system that’s fueling the blackout crisis and causing retrans fees to skyrocket,” said ATVA spokesman Trent Duffy to AT&T’s stand-off with the stations group. “Congress should not only re-authorize STELAR to maintain the FCC’s authority to enforce ‘good faith’ rules, but also modernize retransmission consent rules, which currently favor broadcasters at the expense of consumers and competition.”

In its filing, AT&T said that the stations “went dark,” refusing to respond after their contracts expired. It also claims that the impasses are not over specific issues, but are instead a part of a strategic delay.

AT&T is hoping that the FCC finds that each station has not negotiated in good faith, force them to the table, require forfeitures and anything else the commission deems appropriate. 

UPDATE: This story's headline was updated to reflect that Sinclair manages and controls, but does not own, these stations.

The number of households receiving their television via over the air antenna now represents 14 percent of all U.S. television households, nearly double what it was eight years ago, according to a new report from Nielsen.

With the television industry being upended by the emergence of multiple streaming options, the result has been declining pay-TV subscriptions and the increasing use of alternate methods of distribution, including the old-fashioned TV antenna.

“As of May 2018, more than 14% of all TV households—or 16 million homes—have OTA status, and that number is on the rise,” said Justin Laporte, vice president of Local Insights for Nielsen, in its latest “Local Watch Report.” “As consumers look for more on-demand and cost-effective options, there has been a resurgence in this type of television household.”

In its report, which analyzes the evolving habits of viewers, Nielsen divided these OTA households into two categories: “Plus SVOD,” those households that supplement their viewing options with streaming services such as Hulu (not Hulu Live), Amazon Prime and Netflix; and “No SVOD,” households that get their television strictly via antenna.

There are distinct differences in the demographics and behavior of the two types of households, according to Nielsen.

“The ‘No SVOD” homes tend to be older, more diverse and have a smaller median income, compared to the “Plus SVOD” segment, which skews younger, more affluent and more device-connected,” Laporte said said. “We see different media behavior with Plus SVOD homes consuming less traditional media and spending more time on personal devices. In an average day, the No SVOD homes have more viewing to broadcast stations, at almost five hours, than all of the TV usage combined in Plus SVOD homes.”

A third, but smaller and growing category—part of the “Plus SVOD” group—consists of households that get their programming via streaming services such as DirecTV Now, Youtube TV, Sling TV and others. These “virtual multichannel video programming distributors,” (vMVPD) make up 1.3 million of the Plus SVOD households, according to Nielsen.

“Sharing a similar profile to the Plus SVOD group as a whole, these consumers have a higher median income and access to more devices,” Laporte said. “They also have access to individual cable networks and spend an almost equal amount of time watching broadcast and cable sources.”

Here is the breakdown:

No SVOD: This group represents 6 percent of total U.S. homes, comprising 6.6 million homes in the U.S. This demographic skews older, with over half households of median income of less than 30K. They are also less likely to own mobile devices such as smartphones, streaming devices or tablets.

Plus SVOD: There are 9.4 million homes, representing 8 percent of total U.S. homes that make up this segment. The median viewer age is 36 and the households have a higher average income and more “well connected” with more access to mobile and streaming devices.

Geographically, Milwaukee has the largest percentage of “No SVOD” households: (11.1%) and Plus SVOD households (no vMVPD): (16%), while Dayton, Ohio has the largest percentage of “Plus SVOD (with vMVPD) households, representing 2.7% of all U.S. households.

Regardless of what Nielsen labels them, they are all considered “cord cutters” or “cord nevers” by the industry. 

fuboTV, the sports-focused OTT TV service, plans to launch a 4K offering in beta form this summer, according to co-founder and CEO David Gandler.

fuboTV hasn’t specified how much content in the pixel-packed format it might offer on a linear or on-demand basis, but the company expects to announce more details “in the coming weeks,” Gandler said.

The move will put fuboTV in some select company as a few traditional pay TV providers, such as DirecTV, Dish Network, Altice USA and Comcast have offered a limited amount of content in 4K. Layer3 TV, a managed, market-level, managed IPTV service now owned by T-Mobile that’s also working on a national OTT offering, offers a mix of linear channels and on-demand content in 4K.

Among pure-play OTT services, DirecTV Now is working on upgrades to its streaming platform that will support 4K.

“This is a big push that we have,” Gandler said of fuboTV’s 4K initiative. “For us, [4K] is a big part of our future. Obviously, sports fans who buy expensive TVs certainly want to get the best picture quality.”

In addition to a 4K-capable TV, fuboTV customers that want to take advantage of the future offering will also need to have the app running on a streaming device, such as a Roku player, Apple TV or Fire TV box, that also supports the format.

fuboTV announced last fall that it had more than 100,000 subscribers, and expects to provide updated figures later this year.

While fuboTV’s core focus is the U.S., the company also offers a basic pay TV service in Canada. fuboTV is also developing a version of its service for Western Europe that is expected to launch “very soon,” according to Gandler.

More from the discussion with Gandler and about industry trends and fuboTV's plans will be featured in an upcoming issue of Broadcasting & Cable. 

OYSTER BAY, N.Y.—Traditional pay-TV providers are feeling the heat from OTT subscription services as hundreds of millions worldwide choose over-the-top providers for their video content, according to a new report from ABI Research.

The report, “Service Provider OTT Services and Set-top boxes Update,” finds the OTT subscriber base will reach 400 million this year, largely by providing a lower-cost service with no long-term contracts.

In North America and Europe, pay-TV operators fighting fire with fire. There, operators are offering their own OTT services, improving churn by offering consumers less costly alternatives.

[Read: Study: US OTT Revenue Climbed 41 Percent In 2017]

DirecTV’s Now, Dish Network’s Sling TV and Sky’s Now TV are among the operators offering Virtual Multichannel Video Programming Distributor (vMVPD) services, linear channels via an internet connection. “vMVPD services offer live TV packages as low as US$10 and customized packages are attracting cost-sensitive customers,” says Khin Sandi Lynn, industry analyst at ABI Research.

Dish Network’s Sling, which has secured 2 million customers since launching two years ago, and DirecTV Now, which has won 1.2 million subscribers in one year, are examples of successful vMVPDs. DirecTV has even been able to offset satellite subscriber losses with its vMVPD service, the research firm says.

Although vMVPD packages cost less, live sports packages and customized feature sets have elevated average revenue per user when compared to other OTT subscription services. Both Hulu and YouTube launched live services last year.

“As competition intensifies, content and quality of service are crucial to win the OTT war,” says Lynn.

More information is available on the ABI Research website.

LOS ANGELES & NEW YORK—DirecTV Now has the big four networks now available for its users, as AT&T’s live streaming service will start to carry CBS Television’s entertainment, sports and news programming. The deal also includes Showtime, The CW, CBS Sports Network and Pop.

With the inclusion of CBS and the other new networks, users will be able to stream live programming as well as have access to on-demand content. Programming from CBS and CW will be available on all DirecTV Now packages; this will include CBS’ sports programming, which includes the NFL, SEC college football, the NCAA Division I Men’s Basketball Championship and professional golf. Pop will be included on the “Just Right” package, while CBS Sports Network will be available on “Go Big.” Showtime can be added for $8 more a month.

DirecTV Now customers will have access to live local coverage for 25 live local CBS and The CW stations. Some of the first local CBS stations that will be offered include New York, Los Angeles, Chicago, Philadelphia, Dallas – Fort Worth, San Francisco – Oakland – San Jose, Boston, Detroit, Minneapolis – St. Paul, Miami – Ft. Lauderdale, Denver, Sacramento – Stockton – Modesto, Calif., Pittsburgh and Baltimore. All affiliates of CBS and The CW will have the opportunity to participate going forward.

In addition, AT&T announced that it is planning to launch additional ABC, Fox and NBC affiliate stations on DirecTV Now in the coming weeks. AT&T reports that with these new additions and the CBS deal, DirecTV Now will have more than 170 live local channels available in more than 80 metro areas.

DALLAS—DirecTV Now appears to be on the recruiting path to bring in beta testers for its cloud DVR feature. Eyeing a fall debut, reports indicate that DirecTV Now has emailed invitations to join the beta trial that is set to begin this summer. AT&T confirmed that beta testing was set to begin this summer, but as of now no details are known about how much storage the cloud DVR feature will offer in either the beta trial or when it is released commercially, or at what price point.

The full story is available on TVT’s sister publication Multichannel News.

NEW YORK—Poker has taught us three of a kind beats a pair, and that’s what AT&T will have as of Wednesday, Nov. 30, as the company has set that date for the launch of its third streaming service DirecTV Now. The new service joins the previously launched FreeVIEW and Fullscreen video streaming services.

DirecTV Now will offer live sports, on demand, premium channels, shows and movies to a subscriber’s tablet, smartphone or TV. AT&T is offering four separate packages for subscribers to choose from. “Live a Little” offers 60+ channels for $35/month; “Just Right” offers 80+ channels for $50/month; “Go Big” offers 100+ channels for $60/month; and “Gotta Have It” offers 120+ channels for $70/month. HBO and Cinemax can be added to any of these offerings for an extra $5/month.

AT&T is currently offering some special deals to celebrate the launch of DirecTV Now. For a limited time, the “Go Big” package will be offered for $35/month; customers who sign up during the allotted time will keep the discounted price tag for as long as they keep the service, per AT&T. Seven-day free trials of any of the packages are also available through www.directvnow.com. In addition, Cricket Wireless customers will have access to a code for a one month free trial.

At launch, DirecTV Now will be available through Amazon Fire TV and Fire TV Stick; Android mobile devices and tablets; iPhone, iPad and Apple TV; Chromecast; Google Cast-enabled LeEco ecotvs and Vizio SmartCast displays; and Internet Explorer, Chrome and Safari web browsers. AT&T intends to add additional devices in 2017, including Roku and smart TVs.

Subscribers can download the DirecTV Now app from the Apple App Store or Google Play.

NEW YORK—AT&T is planning on kicking of its DirecTV Now service with some fanfare. The company has announced an invitation-only event to celebrate the launch of its new streaming service.

DirecTV Now has announced that it has lined up around 100 networks to be part of its streaming service, including the likes of Disney/ESPN, HBO, NBCU, Turner, Discovery, Scripps Network Interactive, AMC Networks, Starz, Viacom and Univision. It will be a single-stream service, meaning subscribers can only watch one program at a time on one stream. AT&T is offering DirecTV Now for $35/month.

The launch event will feature press conferences and product demos for invited media and will carry the hashtag #MoreTVFreedom.

The event is scheduled for Monday, Nov. 28, in New York.