A consortium of players have filed a class action suit against AT&T, and its executives, including CEO Randall Stephenson and CTO John Stephens, for false claims made about its DirecTV Now service from 21 September 2016 to 30 January of this year. The suit was filed with the US District Court of the Southern District of New York by individual investors and union fund pension shareholders, including the Iron Workers and the Local 449 Pension Plans. These said that the company made up thousands of customer accounts and that it used abusive sales methods for DirecTV Now as a way to hide "serious technical problems due to the premature roll-out" of the OTT-TV service. LightReading said AT&T gave an emailed statement, saying it planned to fight in court all of these “baseless claims.”
The suit describes statements by CEO Stephenson, saying how early demand for DirectTV Now was “rather dramatic” and “really, really impressive,” that it was expected to reduce churn and that the product would be offered on a profitable basis. CTO Stephens said AT&T reported “solid” quarterly video subscriptions thanks to DirecTV Now. The suit however alleges the AT&T sales teams dropped DirecTV subscriptions into customer accounts without their knowledge using short-term promotions, and that these accounts were included in the "dramatic" growth, even after the end of the promotions and their subsequent discontinuation.
The lawsuit also says that some sales employees were pressured to create fake accounts and bulk up those numbers as AT&T moved ahead with its then-proposed acquisition of Time Warner. The company’s claims of demand and growth for the service was a “mirage,” the suit said, adding that many accounts may have been fake.
Finally, the suit also alleges that certain AT&T salespeople were told to bundle up to three DirecTV Now accounts with a single mobile phone activation, sometimes creating false email addresses and running a customer's credit cards three separate times.
AT&T bought DirecTV in July 2015 and launched DirecTV Now in November 2016, with four-channel packages. LightReading noted that DirecTV Now got off to a fast start with its combination of discounted pricing and no-contract policies but that AT&T has been losing both satellite TV and OTT subscribers in recent quarters as promotions and discounted pricing came to an end. The company lost 946,000 video subscribers in the second quarter of this year, including 778,000 legacy "premium" TV customers (from DirecTV satellite and U-verse TV) and 168,000 DirecTV Now customers. The company said it expects to lose more pay-TV subscribers in the third quarter.
AT&T has been shifting its video strategy to focus on profitability and higher-value customers that will reduce the company's exposure to churn. The company has also launched a new pay-TV service, AT&T TV, with larger channel bundles than DirecTV Now. The new service also uses inexpensive Android TV devices to help facilitate self-installs and to cut down customer acquisition costs and other operational costs.
