Satellite

DirecTV Unveils 2011 Strategy

12/06/2010 12:01 AM Eastern

New York — DirecTV executives last
week unveiled a sweeping strategy for
growth for the months ahead: preparing
customers for price increases, capturing
new revenue from revamped products, cutting
programming costs and even offering
a lower-priced service tier to customers.

DirecTV has been one of the top performers
in the pay TV universe. The satellite-TV
provider is on track to add about 650,000
net new domestic customers this year, ending
2010 with about 19.1 million subscribers.
Additionally, in the past three years the company
has reported 7.6% compound annual
customer growth, 10.4% revenue growth
and 12.2% operating profit before depreciation
and amortization growth.

At its Investor Day meeting at the American
Museum of Natural History here last
Th ursday, DirecTV chairman and CEO Mike
White said the multi-pronged strategy could
capture as much as $750 million in new revenue
by the end of 2013.

“We’ve spent a year relooking at our strategy
at every aspect, based on a detailed
benchmarking we did on each of our competitors,
a huge consumer-research piece of
work that [chief marketing officer Paul Guyardo’s]
team did, and a full assessment of
our capabilities,” White said. “We’re confident that we have a winning strategy.”

While DirecTV has had robust subscriber
growth, White said he doesn’t expect to post
the same increases in 2011. However, he added
that total subscriber rolls (including Latin
America) should rise to 30 million by 2013,
with consolidated revenue — currently on
track to reach $24 billion in 2010 — rising to
$30 billion in the same time frame.

DirecTV will get there through a mixture of
product innovation and cost-cutting, White
said. It will offer a mix of enhancements to its
existing products as well as introducing new
offerings, including:

• Expanding its existing DirecTV Cinema
pay-per-view movie offering to as
many as 6,000 titles available through
the set-top box and the Internet;

• Expanding its existing relationship
with telcos Verizon Communications
and AT&T, possibly reselling their fiber-based
broadband services;

• Testing a premium pay-per-view movie
service that would offer films about one
month after they are shown at theaters, for
between $20 and $30 each;

• Rolling out an addressable advertising
product that would allow advertisers to target
their messages to specific zones and demographics;
and

• Developing new video products and packaging
for the commercial arena, such as hotels,
small businesses, and bars and restaurants.

On the cost-cutting side, executive vice
president of content strategy and development
Derek Chang said DirecTV will continue
to look closely at its programming lineup,
even going so far as to pare some channels
that have low viewership.

“In our battle to manage our economics,
we will look to repackage channels where we
have over-distributed or, frankly, just to remove
certain channels from our platform if
they are not relevant,” Chang said. With the
rising cost of programming, he added, Direc-
TV will also have to find ways to “effectively
communicate the need and rationale for elevated
pricing to customers.”

While it struggles with cost increases,
DirecTV also is contemplating offering
a lower-priced package for more priceconscious
customers, similar to efforts
by Time Warner Cable and other cable
operators.

“Particularly for us, serving the rural areas
where consumers might be a little more
price-sensitive is equally important as it is
that I can serve Greenwich, Conn., with the
premium services you’ve seen strategically,”
White said.

November

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