DirecTV sees weak premium channel demand

No interest in Epix; Q2 sub adds strong

NEW YORK -- DirecTV Group executives said on Thursday that demand for premium channels and pay-per-view buys has weakened amid the recession. They also said they see "no value" in adding another premium movie channel like Epix, the joint venture of Viacom Inc., Lionsgate and MGM.

"We are in a number of very meaningful discussions with other distribution partners," Epix president and CEO Mark Greenberg said.

The comments came on a conference call with Wall Street analysts after the satellite TV giant posted an 11% second-quarter profit decrease, but said its U.S. net subscriber additions grew to 224,000.

That and strength in Latin America made it the world's largest pay TV provider during the quarter with more than 24.2 million users, the company said.

DirecTV reported a quarterly profit of $407 million, compared with $455 million in the year-ago period. Amid increasing competition, it had to spend more, cutting into the bottom line. Revenue rose from $4.81 billion to $5.22 billion. But management said average revenue per user (ARPU) is trending below expectations so far this year due to the weaker demand for premium and PPV, leading the company to reduce its 2009 ARPU target.

Meanwhile, the 224,000 subscriber gain in the U.S. in the latest quarter was up 74% over the year-ago period as DirecTV continued to withstand the recession and competition to exceed Wall Street expectations. A partnership with AT&T also boosted growth. The subscriber gains brought the company's total U.S. user base to 18.3 million as of June 30.

Interim CEO Larry Hunter said Thursday that DirecTV's CEO search after the return of Chase Carey to News Corp. is progressing, but it will likely take months.

DirecTV management also said its deal to merge with Liberty Entertainment is on track to close within a couple of months.
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