AT&T Inc.'s satellite video service DIRECTV is hemorrhaging subscribers, having lost close to 1 million subscribers over the last four quarters. AT&T said it plans to take actions to stanch the bleeding, but analysts and industry observers disagree on the root cause of the losses, making solutions difficult.

When AT&T acquired DIRECTV in 2015, the satellite business was adding domestic video subscribers, and AT&T executives were excited about its possibilities for growth. In the first year after the acquisition, DIRECTV added more than 900,000 domestic video customers as AT&T used promotions and other tools to attract new viewers and to migrate subscribers from AT&T's internet protocol-based linear television service to DIRECTV.

But starting in 2017, DIRECTV began shedding domestic satellite customers, and the losses have only steepened over time. For the most recently ended quarter, DIRECTV lost a record 359,000 subscribers, compared to the 251,000 subscribers lost in the third quarter of 2017. Some analysts attribute the worsening losses to secular challenges, noting that customers are moving away from satellite in favor of broadband and over-the-top streaming services. Others, though, believe the wounds are more self-inflicted as AT&T deprioritizes its satellite business and eliminates promotions.

"DIRECTV is caught in a wave of subscriber losses touching most of the traditional multichannel market," Kagan analyst Neil Barbour said in an interview, adding that satellite is "particularly vulnerable because it's unable to bundle with broadband in many cases."

Kagan is a research group within S&P Global Market Intelligence.

Barbour also pointed to the end of a two-year price lock promotion for DIRECTV, which is now leading to price hikes for consumers.

For his part, AT&T Communications CEO John Donovan said during AT&T's earnings conference call that the end of this promotional pricing will lead to "additional ARPU growth going forward and significant margin relief through 2019." Analysts, however, remain skeptical.

Jeffrey Kvaal, an analyst with Nomura's Instinet, said in a research report that "AT&T's plans to stabilize EBITDA in 2019 seem thin" and that the turnaround "lacks visibility."

MoffettNathanson analyst Craig Moffett also expressed doubt, noting that although AT&T is "pulling back on discounting in order to prioritize cash flow," the resulting subscriber losses still hurt the bottom line.

"The satellite TV business is a fixed-cost business. When the subscriber base declines in a business with intractable programming costs, margins fall," Moffett said.

Complicating matters is the fact that the increased prices are coming at a time when consumers are expressing more frustration with DIRECTV, according to American Customer Satisfaction Index, or ACSI, Managing Director David VanAmburg.

DIRECTV's satisfaction rating fell to 64 in 2018, according to ACSI data, down 6% year over year from 68 in 2017. The index is based on interviews with roughly 250,000 customers annually, with all measures reported on a scale of zero to 100.

VanAmburg attributed the slip in part to the "impact that mergers and acquisitions have on customer service in particular and customer satisfaction generally." AT&T is a bit more than three years out from closing its deal for DIRECTV, and it also bought Time Warner Inc. earlier this year. That transaction is still in the midst of a prolonged legal battle with antitrust regulators.

VanAmburg said that during the integration period after major M&A, "You will tend to see … a slippage in customer service, and that appears to be very much what's going on here — customers kind of getting lost in the shuffle."

The price hikes, he added, only fuel customers' ire. "When a price goes up because a promotion ends or the provider just raises its price, the feeling is, 'I'm paying substantially more but the quality of service hasn't changed,'" VanAmburg said.

Between the move away from promotions and the ongoing subscriber losses, AT&T is "signaling a shift away from the satellite platform" to prioritize its other video services, Kagan analyst Ian Olgeirson said in an interview.

Beyond DIRECTV, AT&T offers U-verse, an IP linear video service tied to AT&T's fiber network; DIRECTV NOW, its virtual multichannel service that starts at $40 per month; and Watch TV, a skinny-bundle product free to AT&T wireless customers with unlimited data plans and $15 per month for everyone else.

AT&T's U-verse added 13,000 net video subscribers, a fact that Donovan touted. Comparing U-verse's performance to the declines seen across the traditional pay TV industry broadly, Donovan said, "We're doing dramatically better than the industry where we have fiber footprint."

Like Olgeirson, Moffett also feels that some of AT&T's satellite subscriber woes have been "self-inflicted" and that U-verse's improved performance in recent quarters "almost certainly reflects a conscious abandonment of the strategy to migrate U-verse customers to DIRECTV."