DirecTV Tells Its Growth Story

1/10/2010 2:00 AM Eastern

DirecTV group chief financial officer Patrick Doyle told an audience at an investor conference last week that gross subscriber additions should decline in 2010, but that the satellite-TV giant sees growth opportunities in apartment buildings and a more aggressive broadband offering.

Doyle, speaking at the Citigroup Global Media and Telecommunications conference in San Francisco on Jan. 5, said that gross additions are expected to trend down this year, mainly because 2009 was characterized by one-time subscriber-boosting initiatives like the federally mandated digital transition.

DirecTV added about 820,000 net new subscribers in the first nine months of 2009, but the growth has slowed from 460,000 additions in the first quarter to 224,000 in the second and 136,000 in the third.

Doyle said that could be partly offset by growth in a newly untapped market for multiple dwelling units — a federal court ruling last year canceled exclusive contracts between apartment buildings and cable companies — and new broadband initiatives.

“We are going to be much more aggressive on broadband connection in the home now that we feel we have a very good technical solution with the introduction of our HR24 box and our H24 box,” Doyle said. “We are going to launch multiroom viewing in the next couple of months.”

Doyle said those initiatives could increase subscriber acquisition costs, which last year were in the $600-per-customer range, to around $700 per customer in 2010.

“We are going to invest more in the home this year,” Doyle said.

Doyle said DirecTV spent part of 2009 identifying MDU properties where it could offer service. “We are probably a month or two away from seeing the final results,” he said. “The initial results are very good.”

Doyle would not quantify how many additional new customers MDUs may bring, but said there is no shortage of potential units.

“At least for a while, we will have no issues with the availability of targeted MDU buildings where we will be able to negotiate entry into and build out,” Doyle said.

While DirecTV expects to boost its HD lineup to about 200 channels after the Dec. 28 launch of its DirecTV-12 satellite (it becomes operational in the second quarter), Doyle agreed that the offering may be reaching the saturation point. DirecTV already has more than 150 HD channels, tops in the multichannel marketplace.

“HD has been really good to us for the last few years,” Doyle said. “We think there is a little bit less in the tank there, but we also are continuously looking at how we can be different than our competitors.”

Later at the same conference, Comcast chairman and CEO Brian Roberts said that the MSO has no intention of transforming the NBC broadcast network into a cable channel after its NBC Universal joint venture deal closes, hopefully by the end of the year, Roberts said that the intention is to keep NBC as an over-the-air broadcast network and will seek to receive fees from distributors for the channel.

“We will continue to broadcast as long as others are and we are going to have an affiliate structure and we are going to continue that model,” Roberts said.

Discovery Communications chief financial officer Brad Singer gave a programmer’s perspective to retransmission consent and carriage fees at the conference, adding that they may help rationalize pricing for cable networks.

“Cable-network pricing may not always have been the most rational,” Singer said, adding that it has been established over several years and with “most favored nation agreements, some distributors may have received too much market power and others too little.

“You’re seeing the broadcasters introducing, over the long term, a more rational pricing environment,” he added. “It may take five years or 10 years to get there, but ultimately that’s what you will see — the market getting to a more rational environment.”

DirecTV net subscriber additions:

SOURCE: Company reports
Q1 ’09460,000
Q2 ’09224,000
Q3 ’09136,000


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