DirecTV has officially spun out from under AT&T, cementing a separation that was first announced in February and clearing a path forward for the satellite television company to absorb all of AT&T’s streaming assets.
The deal was executed by AT&T in collaboration with TPG Capital, the private equity arm of global asset firm TPG, and comes six years after AT&T acquired DirecTV for $67 billion.
Under the banner of its new product, DirecTV Stream, DirecTV will bring together all video streaming services previously launched by AT&T, with the notable exceptions of WarnerMedia’s HBO Max streaming platform and regional sports networks, both of which are subject to a pending WarnerMedia-Discovery deal. The separation deal will see DirecTV double down on its commitment to satellite customers and sports fans, with DirecTV Stream retaining the exclusive rights to the popular streaming entity NFL Sunday Ticket.
As you might recall, AT&T tried the streaming service thing without much success. DirecTV Now, AT&T Now, and AT&T TV all whiffed upon launch. AT&T TV is now part of DirecTV, though it’s unclear whether DirecTV Stream will be a completely revamped product or just a renamed one. There is also no pricing information yet.
AT&T hit peak subscription losses in 2019, and although it has since regained some ground on premium video net losses and subscriber churn, the brand had been hemorrhaging customers for years and had racked up considerable debts. In a February press release announcing the separation, AT&T said that it believed that spinning out its streaming assets into a new entity would provide “...greater focus, flexibility and resources to best position the business to succeed in the long term and deliver on its commitment to customers, employees and shareholders.”
In a statement at the time, AT&T CEO John Stankey said that the decision to create a standalone company “aligns with our investment and operational focus on connectivity and content, and the strategic businesses that are key to growing our customer relationships across 5G wireless, fiber and HBO Max.”
“As the pay-TV industry continues to evolve, forming a new entity with TPG to operate the U.S. video business separately provides the flexibility and dedicated management focus needed to continue meeting the needs of a high-quality customer base and managing the business for profitability,” Stankey said. “TPG is the right partner for this transaction and creating a new entity is the right way to structure and manage the video business for optimum value creation.”
AT&T will retain a 70% ownership stake of the new company, with TPG retaining 30%.