DirecTV CEO Mike White Predicts Further Subscriber Gains

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Satellite TV giant will test a low-end program package for rural customers amid a weak economy as part of a more segmented marketing strategy

NEW YORK -- While its cable competitors continue to lose subscribers, DirecTV expects to add around 200,000 net subscribers in the U.S. in the current fourth quarter to end 2010 with more than 19.1 million users, CEO Mike White said here Thursday.

In comparison, Comcast, the only U.S. TV distributor with more users, reported 22.9 million video subscribers as of the end of the third quarter, although White didn't express any hope of overtaking Comcast any time soon.

Speaking at the satellite TV giant's investor day, White and other top executives also mentioned a revenue projection of about $24 billion for this year.

The bullish subscriber outlook comes as DirecTV has continued to grow, while cable investors have discussed fears of cord cutting. According to SNL Kagan, overall U.S. pay TV subscriber numbers have fallen in the last two quarters for the first time ever, driven by cable losses.

Time Warner Cable recently said it will roll out a budget program package to help financially stressed consumers. White on Thursday said DirecTV, independently of TW Cable, also decided to test a lower-priced package with fewer channels next year, but emphasized he expects a focus on financially strained rural customers and no broad rollout. He didn't provide specifics.

Segmented marketing is key in the current environment as White he and his team see a "two-track" America of people who are better and worse off and an increasingly segmented user base, meaning that one-size-fits-all approaches are doomed.

Addressing cord cutting concerns, White said "the bottom end of the pyramid is a challenge" to serve for distributors these days, but DirecTV tends to have higher-end users. He also signalled confidence in consumers' continued interest in pay TV packages since such things as live sports aren't widely available online.

Giving a three-year outlook, DirecTV said it targets to reach 30 million subscribers across the U.S. and Latin America in 2013, up from about 27 million now, and $30 billion in annual revenue.

Operating profit before depreciation and amortization for DirecTV in the U.S. will grow in the low-to-mid single digits in 2011 and the mid- to-upper single digits in 2012 and 2013, management said. Some Wall Street observers suggested that the stock of the satellite TV giant may have declined slightly on Thursday despite the bullish parts of the guidance as some investors seemed to focus on such things as this lower operating profit growth rate next year. The company cited a step-up in NFL contract costs and other factors as reasons. 

Management also touted new revenue opportunities over the coming years that it put at $750 million-plus.
Key upside lies in such areas as PPV and VOD revenue that historically lies below cable and telecom firms and that is expected to get a boost from the relaunch of the DirecTV Cinema service this year, new local advertising opportunities and an expansion in the commercial business segment.

At the investor event at Manhattan's American Museum of Natural History, DirecTV executives also touted an updated user interface, their goal of having 40% of the user base equipped with a broadband option in three years and a streaming video web site, which is part of a push to allow DirecTV subscribers to access content anytime, anywhere.

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