AT&T Inc. reminded us Tuesday that it's expanding deeper in video entertainment not because that portion of its business is doing so well, but because it isn't.
Even as it reported a surprise gain in wireless customers, AT&T said it lost 199,000 video subscribers in the second quarter -- just two years after acquiring the DirecTV satellite-television business for $67 billion. It's more evidence that diversification isn't a cure-all for telecommunications and media companies desperate for new growth avenues, even if exploring cross-industry tie-ups makes sense in theory.
The wireless carrier is trying morph into an entertainment juggernaut with its pending $109 billion takeover of Time Warner Inc., owner of the HBO, TBS and CNN networks. The hope is that with this content in its hands, AT&T will be able to offer more compelling packages to stop wireless and video customers from fleeing. It says the new DirecTV Now streaming app is already helping to offset cord-cutting. Still, the margins on these cheaper offerings simply don't compare.
CEO Randall Stephenson's vision for AT&T is certainly intriguing. The latest batch of TV defections adds fresh urgency to the need to carry it out.
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