DirecTV Missed Q2 Sub Target

Author:
Updated:
Original:

DirecTV Inc. fell short of its new-subscriber projections for the second quarter of this year, signing 202,000 net new customers, parent Hughes Electronics Corp. said last week.

The company's goal had been between 225,000 to 250,000 sign-ups. The good news: the subscriber gain was 53 percent higher than the number of DirecTV additions in second-quarter 2001. That poor reporting-period performance led to a shakeup in DirecTV's management last summer.

Monthly churn rose in the second quarter to 1.7 percent, due in part to an April $3 price increase for Select Choice, the company's lowest-priced programming package, for existing subscribers. The Select Choice option was eliminated altogether for new customers during the period.

DirecTV president Roxanne Austin predicted during an earnings call on July 15 that the company would lower its monthly churn to 1.6 percent during the third quarter.

Second-quarter subscriber counts were also affected by DirecTV's move to a product-certificate-based sales model at retail chains that had previously stocked the DBS hardware.

"The sales will start to rebound in those stores this quarter," Austin said.

DirecTV added 654,000 gross subscribers in second-quarter 2002, excluding National Rural Telecommunications Cooperative markets. The company ended June with 10.74 million DBS customers, of which 1.75 million were NRTC customers.

The company predicted it would net 1.2 million new subscribers in 2002.

An acquisition boost in the New York market — fueled by the carriage dispute between Cablevision Systems Corp. and Yankees Entertainment & Sports Network (a channel offering 130 exclusive New York Yankees Major League Baseball games) — slowed down somewhat after the start of the baseball season, Austin noted. She expects baseball-related sales to pick up again as the pennant race heats up, she said.

It's too soon to estimate how many Adelphia customers DirecTV would attract with the promotions it unleashed in Los Angeles earlier this month, Austin said. It plans to extend it to other Adelphia markets.

In a research report, Deutsche Bank Securities Inc. analyst Karim Zia estimated that DBS could gain as many as 600,000 subscribers by targeting Adelphia customers.

Average revenue per subscriber rose to $58.10 for DirecTV during the second quarter, due in part to heavy revenues from the Mike Tyson-Lennox Lewis pay-per-view boxing match.

Austin said the company expects average revenues per subscriber to remain at that level for the remainder of the year, driven in part by the start of the National Football League's NFL Sunday Ticket out-of-market pay-per-view package in the third quarter, as well as by the addition of new local broadcast markets.

Related