DirecTV Now: Analog Dollars to Digital Quarters

One enduring observation made by content business executives about the gross revenue or profit margin impact of digital content is that companies exchange analog dollars for digital pennies. That might be overstating the problem, but the general direction of the analogy probably continues to be correct.

For AT&T, the biggest provider of linear video in the U.S. market, the new DirecTV Now streaming product will clearly represent much less gross revenue. The gross revenue and profit margin changes is more on the order of digital quarters for analog dollars, though.

Where a linear subscription might generate $118 a month, DirecTV Now might generate about $35 a month in subscription fees. Gross margin for the linear product might be as high as 45 percent, while gross margin for DirecTV Now might be as low as four percent, on subscription revenues, and perhaps as high as 18 percent, after adding in advertising revenues.

chart from Deutsche Bank that shows how DirecTV Now will likely compare to linear TV:
Screen Shot 2016 11 14 at 9.13.13 AMDeutsche Bank
source: Deutsche Bank
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