News

DirecTV Sets Game Plan

3/12/2010 7:30 AM Eastern

On his first conference
call with analysts since being
named DirecTV CEO in November,
Michael White mapped out
his agenda for the satellite giant,
which includes improving the
customer experience through
technologies like whole-home
digital video recorders and 3DTV
and possibly adding to its stable
of regional sports networks.

White, a former PepsiCo executive,
said on a conference call
with analysts to discuss fourthquarter
results last Thursday
that his philosophy for running
the satellite giant is centered on
a single theme — making Direc-
TV the “absolute best” TV experience
for customers. Along
those lines, White said, DirecTV
would continue with its launch
of whole-home DVR service —
which enables multiple TVs in a
household to access a single DVR
— providing the latest 3-D movies
and sporting events (like Major
League Baseball’s All-Star Game),
continuing its mobile video initiatives
and, through DirecTV
Cinema, expanding its pay-perview
lineup to nearly 400 titles
(half available on the same day
the DVD is released), up from the
15 titles provided today.

“We intend to continue to create
innovative products and services
that lead our industry and
create loyal customers for life,”
White said on the conference
call.

White said he sees sports as one
of the satellite-TV service provider’s
key advantages. Th rough its
relationship with Liberty Media,
DirecTV is part of a unit that owns
three regional sports networks in
Seattle, Denver and Pittsburgh.
The new CEO said that could be
a focus for small, tuck-in type acquisitions.

“We now own three regional
sports networks,” White said.
“We’re also developing strategies
to selectively gain DirecTV market
share in those cities, while
also looking at other cities in the
country for possible opportunities
for expansion.” He did not
elaborate.

Just what networks DirecTV
could acquire remains to be seen.
Most of the regional sports networks
are owned by teams or cable
operators; independent sports
channels are few and far between
and are generally limited to lesspopular
sports.

Miller Tabak media analyst
David Joyce said that RSNs could
help expand DirecTV’s subscriber
base — although it most likely
could not be exclusive — in certain
areas. But the main impact
could be on increased advertising
sales.

“If they get more RSNs, that
helps retain subscribers in those
markets (although the FCC might
require fair access) but it also
would help their local advertising
efforts, which were at a record in
4Q ’09,” Joyce said.

Advertising sales were up 13%
in the quarter, DirecTV’s best
quarter ever in ad revenue.

For the quarter, DirecTV reported
strong revenue growth
of 13% and operating profit before
depreciation and amortization
rose 22% to $1.49 billion.
Net new subscriber additions
however, continued to slow, totaling
119,000 in the period. DirecTV
had warned last year that
subscriber growth could continue
to slow down — the satellite
giant added 136,000 new customers
in the third quarter, compared
to 460,000 additions in the
first quarter.

Investors appeared pleased
with the results. DirecTV stock
rose 4% ($1.31 per share) on Feb. 18
to $32.96 each and was up another
2% (75 cents) in afternoon trading
to $33.71 per share Feb. 19.

On the conference call, chief
financial officer Patrick Doyle
said that while the subscriber
growth was a bit disappointing,
there were some encouraging
trends. Doyle said that premium
channel buy rates, which
had been impacted in past quarters,
had their slowest decline in
fourth-quarter 2009. And payper-
view uptake had its strongest
growth for the year in the
fourth quarter.

Doyle said that the decline
in new customers also was impacted
by tighter credit policies,
which were more focused on attracting
a higher-end customer
than reducing bad debt. Those
customers are also more likely to
buy advanced services, and Doyle
said the company added 50%
more HD and DVR customers in
the quarter than its closest competitor.
Advance services penetration
for the company is now at
about 60% of its total subscriber
base, he said.

March