A group of investors sued AT&T, alleging the telco artificially inflated subscriber counts for its DirecTV Now streaming service — including by creating fake accounts.
In the federal class-action lawsuit, the plaintiffs allege that AT&T wanted to make DirecTV Now seem more successful than it actually was as another way to rationalize its $85 billion acquisition of Time Warner (now called WarnerMedia).
“While AT&T and the Executive Defendants repeatedly touted the success of DirecTV Now, depicting it as a fast-growing product with strong margins and brisk subscriber growth, in truth, this apparent success was a complete mirage,” the lawsuit states. “Information provided by multiple former employees of AT&T and its affiliates from across the country collectively confirm a wide-ranging fraud, perpetrated at the highest levels of the Company, as it pertains to subscriber numbers, promotional activity, customer churn, and the growth and success of DirecTV Now.”
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AT&T, in response to the lawsuit, said in a statement, “We plan to fight these baseless claims in court.”
Per the lawsuit, AT&T “strong-armed” employees into creating fake DirecTV Now accounts, using different tactics “to covertly add the product to customers AT&T accounts without their knowledge.” For example, according to the investor suit, employees told customers they were waiving a $35 fee for phone upgrades but actually did assess the fee — and then used that to create up to three DirecTV Now accounts with fake email addresses.
AT&T also pressured staffers to sell as many subscriptions to DirecTV Now as possible with unrealistic sales quotas, the lawsuit claims. As the lawsuit notes, AT&T ended the $35-per-month special introductory pricing for a package with more than 100 channels less than six weeks after it launched DirecTV Now in 2016.
“Given the heavy promotional activity, intense sales pressure, and prevalence of fake accounts, it is unsurprising that many DirecTV Now accounts were not being used and were promptly cancelled,” the lawsuit says.
The lawsuit also claims DirecTV Now experienced severe technical issues and the services carried “irrationally low prices.” The plaintiffs accuse AT&T execs of knowing that DirecTV Now was suffering high churn rates but failed to disclose that. In January 2019, AT&T CFO John Stephens told investors that about 500,000 DirecTV Now customers, who had been paying $10 per month, had either cancelled service or stepped-up to regular pricing.
For the 12 months ended June 30, AT&T lost 469,000 DirecTV Now customers — a 26% drop. The telco has blamed the drop on the roll-off of promotional offers and price hikes on existing customers. As of the end of the second quarter of 2019, AT&T reported 1.34 million total DirecTV Now subs (including 8,000 free or substantially free trial-period subscribers). The service peaked at 1.86 million customers in the September 2018 quarter.
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