July 2, 2018 / 6:47 PM / a year ago

CORRECTED-DirecTV Now to hike prices as content fees rise across industry

(Corrects fourth paragraph to say “high” instead of “low” single-digits)

By Sheila Dang

July 2 (Reuters) - AT&T Inc said on Monday it is raising the price of its DirecTV Now streaming service by $5, the latest increase in the industry following a similar price hike by Dish Network Corp’s Sling TV.

Traditional cable and satellite TV companies are losing customers as viewers move to cheaper services like Netflix Inc or Google’s YouTube TV, but are raising prices for their online streaming packages as content costs continue to rise with growing production costs.

DirecTV Now’s cheapest package will increase by 14 percent, to $40 per month, beginning July 26 for new customers, AT&T said, while the change will roll out to existing customers based on their billing date.

Craig Moffett, an analyst with MoffettNathanson, said content costs are rising for streaming services similar to traditional TV, likely in the high single-digits on a percentage basis every year.

Moffett estimated that content costs have risen 10 percent for DirecTV Now since it launched in November 2016.

“The question is whether customers will stick with [DirecTV Now], or will they react with the same kind of frustration they had with rising cable and satellite bills,” Moffett said.

An AT&T spokesman said the price increase will bring the service “in line with the market - which starts at a $40 price point,” but declined to say if rising content costs was a reason.

Brett Sappington, director of research at Parks Associates, said price increases are a leading reason why viewers cancel subscriptions.

“Customers don’t like surprises that hurt their pocketbook,” he said.

Sling TV on Thursday said it was raising the price of its base package by 25 percent, to $25, which Sling President Warren Schlichting attributed to rising sports content fees.

Moffett said he was hopeful DirecTV Now is moving closer to making a profit after the price increase, but estimated the service is losing a few dollars each month on every customer.

“The one thing that is clear is that this is a generally lousy business,” Moffett said. He estimates there are no profitable players in online streaming, including Sling.

An AT&T spokesman and Dish spokeswoman did not immediately respond to requests for comment on whether their streaming customers are profitable.

Reporting by Sheila Dang Editing by Leslie Adler

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