Hughes Electronics Corp. last week reported increases in
revenues, but a decrease in earnings, for the third quarter of 1998, attributed in large
part to increased subscriber gains and customer-acquisition costs for its DirecTv Inc.
DirecTv has yet to reach breakeven. Eddy Hartenstein,
DirecTv's president, said the company is still on track to reach breakeven and to
report cash-flow earnings sometime in 1999.
Third-quarter-1998 revenues at Hughes increased 20.3
percent over year-earlier figures, to $1.513 billion. Earnings fell to $42.9 million from
DirecTv's domestic U.S. service posted a 37 percent
increase over 1997 in third-quarter revenues, to $298 million. Its third-quarter operating
loss was $31 million -- more than double the $15 million loss for the same quarter last
Hartenstein told analysts last Monday that DirecTv's
cost per acquisition has remained consistent throughout the year.
DirecTv's consumer-advertising expenditures almost
tripled in 1998's third quarter versus last year's, Hartenstein said. To help
promote its "NFL Sunday Ticket" offer, the company moved some of its advertising
budget up from the fourth quarter to the third quarter, "with positive results,"
he said during the analysts' call.
DirecTv reported record third-quarter subscriber growth of
303,000 acquisitions, up 20 percent over the same quarter last year. For each additional
new customer, DirecTv had to pay retailer and manufacturer subsidies, which led to the
Mickey Alpert, president of Washington, D.C.-based Alpert
& Associates, said the increased losses are a reasonable trade-off for a higher
"If your strategic objective is to get market
penetration, you do that at the expense of getting to breakeven right away," Alpert
said, adding that DirecTv would do well to continue focusing on its long-term objectives.
Hartenstein said revenues per subscriber continue to
increase every month, and they have reached about $45 per month. He added that more
customers have been stepping up to the company's expanded "Silver,"
"Gold" and "Platinum" programming packages.