Entries in DirecTV (4)

Sunday
Dec182011

DirecTV Extends Lead Over DISH in DBS Market Share Battle

3Q11 Connections: DBS Subscribers

As has been the trend in recent quarters, the number of DBS connections continued to grow in the third quarter, but DirecTV was the beneficiary,  while DISH Networks continued to lose customers. Total DBS video connections numbered more than 33.7m at the end of September, up 216k from 2Q11. YoY DBS customers have grown by nearly 500k—but DirecTV has added a total of 826k while DISH’s total has fallen by 344k, or 2.4%. DirecTV was serving nearly 19.8m at the end of the quarter while DISH’s sub base slipped below 14m. Cable provider Comcast remained the largest video service provider in the quarter, with 22.36m customers, but given recent trends, could be displaced by DirecTV some time next year. DISH comes in fourth, followed by Time Warner Cable with 12.1m.

Fewer and fewer ILECs are breaking out their DBS subscriber counts, and some, like Verizon and AT&T are no longer actively marketing the service as they promote their own video services. At last count, CenturyLink was serving approximately 1.7m DBS customers and Frontier Communications had between 400k-500k. Windstream also served about 450k at the end of the third quarter, up 3.6% YoY.

Tuesday
Dec132011

DirecTV and AT&T Narrow the Gap for Top Spots in Video, Wireless

3Q11 Connections: Ten Largest Providers

The top providers by connections in all categories remained the same in 3Q11: AT&T (NYSE:T) in wireline voice, Verizon (NYSE:VZ) in wireless and Comcast (Nasdaq:CMCSA) in video. In wireless and video however, the second place finishers narrowed the subscriber leads in 3Q11, outgaining the top dogs for the quarter.

While AT&T has had a difficult month on the T-Mobile front, the #2 wireless provider outperformed Verizon in 3Q11. It added 2.1m wireless connections in the quarter--surpassing the 100m mark--and outgained Verizon by 700k connections. Overall, the top ten wireless providers added a combined 4.9m connections in the quarter, while the top ten wireline voice providers lost nearly 2m voice lines.

In the video top ten, it was DirecTV (Nasdaq:DTV) making a charge at #1 Comcast in 3Q11. Benefiting from the move to offer its flagship NFL Sunday Ticket package for free, the leading satellite provider added a net 327k U.S. subscribers in 3Q11—its best third quarter gain in six years. DirecTV took nearly 500k subs off of Comcast’s lead, as the leading cableco shed 165k video subs in the quarter. With 19.8m video customers, DirecTV trails Comcast by 2.6m connections. Elsewhere, AT&T and Verizon both experienced around 2.5% growth in video subs QoQ, the strongest percentage growth of the top ten providers.

In wireline voice, the four cablecos in the top ten reported slim QoQ connection gains in 3Q11, while the six LECs in the top ten shed a combined 2.1m connections in the quarter. AT&T accounted for a majority of the losses, dropping 1.2m connections, or 3% of its wireline voice customer base. The #2 and #3 wireline voice providers didn’t fair much better, as Verizon and CenturyLink (NYSE:CTL) lost 478k and 254k subs QoQ in 3Q11.

Looking ahead in the top ten categories, the battle for first in wireless should be interesting to watch. After a strong 3Q11 for AT&T, its acquisition of T-Mobile is now on life support, creating some uncertainty for company. Meanwhile, through its spectrum acquisition from the cablecos, Verizon is making moves to solidify its top spot in wireless.

Friday
Nov042011

DirecTV Adds 327k U.S. Subs in 3Q11

Revenue Rises 14% YoY for DirecTV

As the U.S. cable providers continue to blame their declining video subs and revenues in 3Q11 on a lagging economy, DirecTV (Nasdaq:DTV) reversed course and turned in its largest third quarter subscriber gain in seven years this past quarter. The leading satellite provider reported a net addition of 327k customers in the U.S., fueled by the popularity of its Sunday NFL Ticket.

During the summer, when the status of the NFL season was in doubt, DirecTV decided to offer its NFL package to customers free of charge in 2011, if they signed up for a two-year contract. The offer proved popular, attracting nearly 1 million gross additions of customers in during the quarter. While it is giving away its NFL package free this year, DirecTV commented that it now has the opportunity to upsell these customers next year, creating potential for ARPU growth.

Overall, DirecTV grew its top line 14% YoY in 3Q11 to $6.8b, attributable to its customer gains and a 3.6% rise in ARPU. In addition to sub growth in the U.S., DirecTV added 574k net connections in Latin America as well—a market which also provided it with strong growth in 2Q11. Improved penetration of its premium services with new customers led to the jump in ARPU in the quarter. The take rate on DirecTV’s whole-home DVR  in 3Q11 was up to 40% from 30% YoY, while 65% of its new subs signed up for both HD and DVR services compared to 50% of new customers in 3Q10.

While DirecTV’s top line and video subscriber growth broke the downward trend set by cable providers this earnings season, it experienced the same rise in programming expenses as its cable rivals. Broadcast programming costs increased $660m, or 10% YoY, in 3Q11 at DirecTV. It also increased spending to acquire and retain customers by 10% YoY in 3Q11. Its operating margins fell 240 basis points YoY to 21.3% as a result of the rise in costs. Despite narrowed margins, its net income rose 8% in the quarter to $516m or 70 cents a share.

On the earnings call, DirecTV management opened up about the company’s outlook in future quarters and potential opportunities.

Patrick Doyle, DirecTV cfo, commented on the potential impact in 4Q11 of giving away the NFL Sunday Ticket for free: “The fact of the matter is because we have more NFL subs, there won't be a negative impact on revenue or ARPU in the fourth quarter. If anything, there will be a modest benefit.”

Ceo Michael White discussed a potential partnership with DISH Network down the road to get involved in wireless broadband: “The mobile wireless business is a really tough business. Just look at Sprint. Fixed broadband to the home is something no one's done in scale up to this point. But it's certainly something that we continue to think about and have done a lot of technical analysis on. And we'll continue to keep an open mind and, heck, I've said before, I’m willing to partner with anyone if it makes good sense for our shareholders and for our customers.”

In 3Q11, the new DirecTV subscribers sent a message to all media providers that programming, such as the NFL Ticket, can still get people to spend money, even in a down economy (albeit at a discounted price).    

Friday
Aug052011

2Q11 Earnings: Industry Leaders Comcast and DirecTV Report Strong Growth

Providers Turn to Mobile and Online Video Services

After hearing the news that cable giant Comcast (Nasdaq:CMCSA) called satellite leader DirecTV (Nasdaq:DTV) a “serial false advertiser” and plans to sue the DBS provider over its Sunday NFL ticket advertising, I decided to review the 2Q11 earnings of the feuding companies together.

Both providers reported stronger than expected revenues and profits for 2Q11. DirecTV’s revenue was up 13% YoY, while its 2Q11 profit of $701m jumped 30%. Comcast on the other hand saw pro forma revenue grow 9% and profits rise 16% YoY. Despite solid earnings growth, both struggled to add and retain television subs, suggesting that discounted prices for FiOS and U-Verse may have adversely impacted both providers.

Comcast and other cablecos have been losing video subs to Dish and DirecTV for years, but in 2Q11 satellite gains in the U.S. dropped sharply. While DirecTV added nearly 500k subs in 2Q11, only 26k of the net adds were in the U.S., as Venezuela and Brazil accounted for the lion’s share of its growth. By comparison, it added 184k U.S. customers in 1Q11 and 100k in 2Q10. A growing churn rate is of increasing concern for DirecTV ceo Michael White.

“In response (to rising churn), we've significantly stepped up our efforts to closely manage churn in a more targeted fashion. For instance, we further refined our segmentation analysis to identify those customers that are most likely to churn as they get close to the end of their two-year contract, and matched them up with our best agents and best offers. We also increased our upgrade and retention spending for higher quality subscribers.”  

Essentially, DirecTV plans to spend more to retain customers, which will translate into compressed operating margins. Its margins from U.S. operations dropped in 2Q11 and look for that trend to continue as its retention efforts increase. 

DirecTV’s top line growth could also suffer over the next few periods, thanks to its free NFL Sunday ticket promotion which Comcast claims is laden with potential fees and penalties. DirecTV has historically charged a monthly fee for its NFL package, but decided to drop the fee for the 2011 season—expecting an influx of new subs in return. Subscriptions however remained relatively flat, and it will lose the NFL fees from existing customers.

While Latin America bolstered DirecTV’s 2Q11 results, Comcast benefited from a strong performance from its NBC Universal segment that it acquired in 1Q11. On a pro forma basis, revenue jumped 17.1% YoY for the division in 2Q11—as broadcast and filmed entertainment revenue rose around 20%. It was the same old story for its cable communications segments—television revenue was flat as video subs were down, high-speed Internet revenue was up 10% on improved broadband penetration, and its business services delivered impressive 45% YoY growth.

In order to retain and attract television customers, both Comcast and DirecTV are expanding their mobile and online video services. Comcast is much further along in the process, offering video on demand with XFINITY over the Internet and through its XFINITY mobile aps for smartphones and tablets. DirecTV however appears poised to ramp up its mobile video strategy, hinting of its interest in Hulu (partially owned by Comcast) on its 2Q11 earnings call. The main question however remains: how much incremental revenue can be earned through mobile and Internet video?

“I think suffice it to say, we have consistently said that we want to make sure that we can make DIRECTV available anytime and anywhere our customers want it. The Hulu software has some nice aspects to it, but you also have to kind of form a judgment about its business model and what you think that business model can generate,” said White.

Overall, 2Q11 on paper was a solid quarter for both Comcast and DirecTV, but the areas of their 2Q11 growth are not sustainable. DirecTV admitted its Latin America business was volatile and that 50% growth cannot be expected in the future, while Comcast said with regards to NBC Universal, “there'll be some hits and misses and more volatility.”

Where Comcast however can benefit from its diversified service offerings and its high margin and growing business segment, DirecTV is reliant on television subs for growth. Unable to offer its own triple plays, programming is where DirecTV has won customers in the past. Adding mobility to its programming appears to be what DirecTV believes will grow its business in the future.