AT&T is raising the base price of its DirecTV Now streaming service by $5 per month, despite promising in court that its acquisition of Time Warner Inc. would lower TV prices.
AT&T confirmed the price increase to Ars and said it began informing customers of the increase this past weekend. “The $5 increase will go into effect July 26 for new customers and varies for existing customers based on their billing date,” an AT&T spokesperson said.
The $5 increase will affect all DirecTV Now tiers except for a Spanish-language TV package, AT&T told Ars. That means the DirecTV Now packages that currently cost $35, $50, $60, and $70 a month will go up to $40, $55, $65, and $75.
“To continue delivering the best possible streaming experience for both new and existing customers, we’re bringing the cost of this service in line with the market—which starts at a $40 price point,” AT&T said.
What AT&T told a judge
Just two months ago, AT&T said in a court filing that buying Time Warner would allow it to lower TV prices. The US Department of Justice tried to stop the merger, arguing that it would raise prices for consumers, but a federal judge sided with AT&T. The merger was completed on June 15.
AT&T scoffed at the Justice Department’s argument that the merger would raise prices. The telecomm giant wrote in its post-trial brief that the merger will “enabl[e] AT&T and Time Warner to reduce consumer prices.”
“The evidence overwhelmingly showed that this merger is likely to competition substantially, because it will enable the merged company to reduce prices, offer innovative video products, and compete more effectively against the increasingly powerful, vertically integrated ‘FAANG’ [Facebook, Apple, Amazon, Netflix, and Google] companies,” AT&T told US District Judge Richard Leon in the brief.
“There is no sound evidence from which the Court could fairly conclude that retail pay-TV prices are likely to increase,” AT&T said in that same filing.
AT&T’s brief pointed out that the Justice Department walked back some of its price claims during the trial. “The government concedes that Turner will not withhold content [from other pay-TV operators], and it concedes that the merged entity will reduce its own consumer pay-TV prices,” AT&T wrote.
Price benefits should flow to consumers quickly, AT&T’s filing said. “[C]ertain merger efficiencies will begin exerting downward pressure on consumer prices almost immediately [after the merger]” AT&T wrote.
Owning Time Warner gives AT&T more control over how much it pays for the programming it offers to DirecTV customers, because it no longer has to negotiate with a third party for Time Warner content.
“Currently, our ability to bring customers more of what they want has been constrained because we own very little of our own programming and cannot unilaterally determine what content we offer and how consumers may access it,” AT&T CEO Randall Stephenson told a Senate committee in December 2016 when he was asking the government to approve the merger. “Instead, we have to negotiate those matters with third-party content owners, and in a fast-changing marketplace like video, it is particularly difficult to obtain flexibility to pursue new and untested business models.”
AT&T looking for more revenue
When contacted by Ars, AT&T didn’t explain why the Time Warner merger didn’t prevent the $5 price increase. But the company noted that it is also offering a new $15-per-month streaming service with fewer channels; that service is a free add-on for AT&T mobile customers with unlimited plans.
AT&T last month also removed HBO from one of its unlimited mobile data plans, and the company raised the price of that plan by $5 a month. AT&T also recently raised the “administrative fee” charged to postpaid wireless customers from $0.76 to $1.99 per month, according to BTIG Research.
“AT&T attributed its changes to market forces, but the company may be under pressure to find new sources of revenue after its $85.4 billion purchase of Time Warner,” CNBC wrote today. “The timing of AT&T’s price hikes and fee bumps coincides with the closure of the deal.”