Austin: DirecTV's Still 'Best of Breed'

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Roxanne Austin says she gets a kick out of those commercials for cable operators in which former direct-broadcast satellite subscribers talk about how they ditched the dish. The DirecTV Inc. president remains as confident as ever about driving growth. She spoke last week with Multichannel News national editor Steve Donohue. A longer version of this edited interview appeared in the March 7
Multichannel Newsday.

MCN: You recently warned that DirecTV will add fewer new subs this year than you have in the past. Are the days of rapid subscriber growth over for DirecTV?

Roxanne Austin:
Absolutely not, it's just that this is the law of large numbers. We're the No. 2 multichannel service provider in this industry, with 11.3 million [subscribers]. But if you factor in [1.6 percent monthly] churn on our base, you can see the effect of that even at those low numbers. But on a gross basis, we're going to add as many new gross subscribers this year as we did last year.

MCN: Is it a challenge to maintain morale with the failure of the merger talks with EchoStar Communications Corp., and with employees now hearing about talks with News Corp. and Liberty Media Corp.?

Austin:
I've basically said to our people [that] you have to focus on what you can control, and if you can post, which we did, the kind of significant and tangible improvements in a business, despite all of that uncertainty, you will be a better employee whether you go to work for the newly merged EchoStar-DirecTV; you go to work for DirecTV only because the merger doesn't go through; or you wind up leaving us and going to work somewhere else.

MCN: If a deal is going to be done, how soon may that occur?

Austin: I think it's soon. Clearly everybody expects in short order there will be some direction. That's really all I can say.

MCN: With DirecTV Broadband out of the picture, is it more difficult to compete with cable operators who offer their subscribers cable modems, in addition to digital video?

Austin: We really are a best-of-breed video choice, and I think that's demonstrated clearly by our [average revenue per user]. We have the highest premium pay penetration of any multichannel service provider in the industry. We have roughly 140 percent pay penetration, compared to roughly 70 percent to 80 percent for a cable operator. The people that pick best-of-breed, they're picking DirecTV.

Now, in most cases you can take DirecTV for your video source and ignore the offer for a cable-modem bundle for digital cable, and still have a better price/value equation, because our basic offer [the $39.99 Total Choice package of 200 channels] resonates extremely well with digital-cable or analog-cable providers, because it's cheaper than most digital-cable packages with comparable service.

MCN: You don't buy cable's argument that in the long-term, the consumer wants one company from which he can buy video, voice and data?

Austin:
Personally, I don't think that's been an issue at all, and I think it won't be for a while. Of course, to hedge our bets we are actively pursuing partners where we can provide a bundled offer if customers choose to do so.

MCN: Do you also look at rolling out digital video recorders as another way to differentiate yourself?

Austin: Absolutely. I'll tell you the things we have to have to compete with cable. Local markets are clearly critically important. As you know, DirecTV is doubling its number of local channel markets by the end of the year.

Second, is clearly DVR. We are going to aggressively deploy DVR this year. We want to have as many DVRs this year as we can afford to do, and we're clearly going to do it both in new customers as well as existing customers, making it attractive to them.

MCN: With more than 11 million subs, is DirecTV big enough to create its own original programming?

Austin: We've had some pretty serious — and you would recognize their names — directors say, 'I'm going to develop this movie concept — would you consider first running it on DirecTV?'

The answer is yes. We are very open to creative ideas on how to use the No. 2 subscriber base in this industry to get out creative content, and for us to come up with creative ways to retain the subscriber base. But you're not going to see us put a studio down the street that we own and operate, and start developing content.

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