AT&T’s big bet on old-school video delivery technology testifies to an inescapable reality of the telecommunications scene: pay-TV still rules.
At a time when everybody’s rushing to plant a stake in the online video delivery business, the $48.5 billion-plus-debt deal to buy DirecTV signals the enduring economic power of a tried-and-true formula: charging millions of people $100 per month for packages of TV channels.
The average monthly revenue per user (or ARPU) produced by DirecTV last year in the U.S. was just over $102. The large bulk of that money comes from subscription payments, although a small sliver reflects contributions from targeted advertising services and some specialized interactive stuff.
Old-school pay TV is no longer considered a terribly sexy business in an era when online video seems all the rage and not a day goes by when somebody fails to write something either prescient or praising about Netflix Inc. or YouTube. The deal “sure seems backward-looking, as it completely misses the imperative of broadband and online video in all of our lives,” argues Will Richmond at VideoNuze.
But there’s trendy, and then there’s cash. DirecTV generates slightly more than…