How Advertising Will Live on DirecTV Now, AT&T's New Streaming TV Service

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A promotional page for AT&T's new streaming TV service.
A promotional page for AT&T's new streaming TV service. Credit: DirecTV Now
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Consumers will be able to find their shows in new ways when AT&T on Wednesday debuts DirecTV Now, its service offering TV over the web, but the advertising model will be very similar to the traditional model -- at least at first.

At an event Monday afternoon that included an appearance from Reese Witherspoon, who will have a channel on the platform, AT&T revealed the pricing and packages for the highly anticipated service. It also described plans to use its trove of consumer data to deliver more relevant ads to viewers.

DirecTV Now will allow for a greater level of personalization in advertising and the ability to serve commercials that better fit their audiences, said Enrique Rodriguez, exec VP and chief technology officer at AT&T Entertainment.

To begin, however, the same ads on networks' normal live feeds will also appear on DirecTV Now.

AT&T will immediately be able to provide advertising inventory in video on demand for 64 channels, said Rick Welday, president of AT&T AdWorks, the ad sales division of AT&T Entertainment. Exactly how much of that inventory it will supply will vary by network.

By mid-2017, Mr. Welday said he expects to be able to dynamically insert ads into live programming. But this too will vary network by network and be limited to the two minutes of commercial time per hour that AT&T can sell. The commercials that networks sell nationally will mostly remain the same.

There's no denying the potential for TV services delivered to individual internet addresses to drastically alter the TV ad model. More data and the technology to serve ads to specific households or signed-in individuals makes TV delivered over the web an attractive opportunity for advertisers.

Mr. Welday predicted that these so-called over-the-top platforms will encourage experimentation in new ad formats that break away from the traditional 15, 30 and 60-second spots. There could also be tests of actually scheduling ads at specific times and in specific shows instead of the more general buys prevalent today, when an advertiser with a cable conglomerate might not even know on which networks to find its commercials.

And as marketers devote more of their TV budgets to targeted buys that improve the return on their investment, a decrease in ad loads will naturally follow, Mr. Welday added.

Dish Network has expressed similar goals for its OTT service, Sling TV, but its ad model hasn't evolved drastically since its introduction in February 2015.

The ultimate goal is to expand addressable TV ads beyond the two minutes of time that distributors such as cable companies and OTT services get, but realizing that ambition will take time and include plenty of negotiations between operators and TV networks. AT&T's proposed acquisition of Time Warner could help further these efforts by breaking down the barrier between the two.

"There's an opportunity for siloed business models to work better together for benefit of consumer," Mr. Welday said. He declined to comment on the proposed AT&T acquisition of Time Warner.

DirecTV Now will be available on Nov. 30 and offer four bundle options: 60 channels at $35 per month, 80 channels for $50, over 100 channels at $60 and more than 120 channels for $70 per month.

The basic package includes the ABC, NBC and Fox broadcast networks as well as many top cable channels like ESPN, CNN, USA and FX. AT&T has not struck a deal to carry CBS. There's also the option to add HBO and Cinemax for $5 each per month.

The 100-network-plus package will be available for $35 for a limited time, with price increases down the line.

NFL Sunday Ticket will not be included in the offering, but AT&T is in conversations with the NFL, said John Stankey, CEO AT&T Entertainment Group.

The service will debut without a DVR function, but AT&T plans to add that next year.

At the start, DirecTV Now will be available through Amazon's Fire TV and Fire TV stick, Android mobile devices and tablets, and Apple's iPhone, iPad and Apple TV, among others. Availability on Roku and smart TVs from Samsung and other devices is expected in 2017.

With DirecTV Now, AT&T is targeting the approximately 20 million households who don't have a pay-TV subscription or have cut the cord.