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DirecTV: 1.6 Million Subs With Net-Connected Boxes Are Not Enough
DirecTV is increasingly depending on cable rivals to deliver over-the-top video to subscribers — and may be seeking broadband reseller deals with MSOs.
As of the end of Q3, the satellite TV operator had 1.6 million subscribers with set-tops or DVRs connected to the Internet, roughly doubling over the last 12 months. That’s 8% of DirecTV’s U.S. subscriber base of 19.8 million — and CEO Mike White says it’s not nearly enough.
“There’s no question that over time for us to optimize VOD, pay-per-view variety… having two pipes to the home, kind of one that connects to a cloud or a digital locker in the sky, if you will, and another one that’s coming from the satellite, is of vital importance to our strategy,” White said on Thursday’s earnings call. “And in particular, almost all of the TV Everywhere stuff is kind of linked to that.”
White blamed “executional challenges” for the relatively low penetration of Internet-connected DirecTV boxes, including training field techs. “Sometimes the customer said they had a router and it turned out they had a modem,” he said. “So we’ve had to get some kinks out of the execution.”
Currently about 40% of DirecTV’s HD DVR gross adds are connecting to broadband, through its Connected Home program, which offers 6,000-plus movies and TV show episodes as well as content from YouTube and other sources. White mentioned the company’s recently upgraded iPad app, which initially streams 38 live channels to subscribers in their homes (see DirecTV Adds Live In-Home TV To iPad App).
As for negotiating for TV Everywhere rights — to access content outside the home — White said it’s “a topic of every one of our discussions, but each [programmer] has still got a slightly different strategy and policy as it relates to it. And I think, we’ll all continue to make progress in that regard.”
Now, does DirecTV need to “own the pipe,” as in the broadband pipe, to succeed?
White doesn’t think so.
“If you’re really serious about building a national network, you’re talking multibillions of dollars. And therefore, you got to make sure you got a better price performance than what’s out there,” said White, adding: “I’ve also said we’ll continue to have conversations with other cable companies about wholesale deals.”
While Charlie Ergen’s Dish Network is amassing spectrum for what may be a broad-scale wireless broadband play, DirecTV isn’t in the same camp, according to White.
“The mobile wireless businesses is a really tough business. Just look at Sprint. Fixed broadband to the home is something no one’s done in scale up to this point,” White told analysts.
DirecTV has been working with Verizon Wireless to test Long Term Evolution (LTE) wireless technology using a specially designed “cantenna” that sits alongside the satellite dish. That would potentially let DirecTV deliver an integrated Internet and TV wireless bundle (see DirecTV Tests LTE With Verizon Wireless).
Verizon Wireless says its LTE network offers 5-12 Mbps downloads and 2-5 Mbps uplinks. But the LTE play isn’t a slam dunk, according to White.
“We feel like the ‘cantenna’ approach is a very interesting approach,” he said. “I think the key for its success, however, will be how things shake out in terms of its price performance relative to, let’s say, DSL or DSL plus. And I think there, the speeds looked pretty good in terms of megabits per second.”
Moreover, DirecTV wonders whether Verizon Wireless’ LTE usage caps are too restrictive. “Right now, the caps are pretty low if you want to download three or four movies a month,” White said. “The question will be how the caps work out and how customer-friendly, I would say, the caps are.”
Programming Note! Don’t miss the Multichannel News breakfast panel discussion at SCTE Cable-Tec Expo 2011 in Atlanta, Video’s Next Act: Setting the Multiscreen Stage, on Tuesday, Nov. 15, prior to the opening general session. Click here for more info: www.multichannel.com/SCTE2011.