News

Video 'Everywhere’

8/22/2009 2:00 AM Eastern

DirecTV has used programming and technology to differentiate its video product and that strategy isn’t likely to change anytime soon, according to executives. If anything, the company is expanding the ways it can deliver nonexclusive programming with new and refined technologies including split screens, interactivity and video on demand.

“We are continuing to focus on our core strength, which is content differentiation,” said DirecTV executive vice president of content strategy and development Derek Chang. “That has already been crystallized with our sports and high-definition programming offerings and those segments will continue to be drivers for us going forward. But we want to continue to innovate in that space as well.”

That means taking the traditional video product to new levels including delivering them via new platforms. It doesn’t mean owning those alternative delivery routes, but it does mean using them effectively, Chang said.

DirecTV has been hamstrung by its inability to offer voice, video and data products on its own. The company has had to partner up with telephone companies to be part of that triple-play option for consumers. That’s been positive for both parties; however, where the phone companies are offering their owned-and-operated wireline video service, DirecTV is on its own.

That means it must continue to attract customers using and expanding on its core video product. One of the biggest things DirecTV did this year was to renew its 15-year-old contract with the National Football League for the “NFL Sunday Ticket” package of out-of-market games. Sunday Ticket has been a boon for DirecTV and is the company’s signature programming offer. The new contract was expensive: Reports put the deal at more than $4 billion. But executives weren’t about to let it slip from their fingers.

“NFL Sunday Ticket has been part of DirecTV since the beginning and we certainly didn’t want to lose it,” Chang said. “At the same time, we weren’t going to do anything that didn’t make sense for us financially. [The new contract with the NFL] may not make a lot of money, but we do have wireless and broadband components that are very attractive for us and our customers. At the end of the day, we believe any drop in profits will be mitigated by what this does for our customers and our brand.”

The new deal gives DirecTV the exclusive rights to the Sunday games through 2014 and enables NFL fans who can’t receive DirecTV service to subscribe to Sunday Ticket via broadband. That service is slated to launch no later than 2012. DirecTV already delivers the games via broadband to existing subscribers of the “NFL Sunday Ticket SuperFan” add-on package, Chang said.

The new contract also gives DirecTV the ability to deliver Sunday Ticket to customers via mobile devices. DirecTV executives aren’t anticipating a huge wave of customers accessing their smart phones to watch football games, but it does give them an additional outlet and provides an added value to the package.

“Watching NFL games is a 'hunker-down,’ social experience for most people,” said DirecTV executive vice president of entertainment Eric Shanks. “But for those people who really want to watch their favorite team play and they can’t watch it in their living rooms, this is a great product. The ability to deliver programming using other delivery methods, including the Web and mobile devices, is a logical extension of how our customers are watching media and we want to be part of that and satisfy those needs.”

Analysts like the concept. “While watching NFL games on a cell phone is certainly a niche product [given its cost], it illustrates how DirecTV continues to push technology to cement its brand identity with consumers,” Richard Greenfield, Pali Research analyst wrote in a July investor note. DirecTV is 'the’ place for sports fans.”

While DirecTV’s NFL SuperFan customers have been able to access games via the Web for two years, the company is now exploring how it might offer all its programming online to customers.

To be sure, the “TV Everywhere” concept isn’t unique to DirecTV. Cable operators are trying to create similar products for their customers. The company has been talking to programmers for some time about the project and hopes to have proprietary technology in place to offer the product to its customers in 2010. Getting this product underway in a timely and cost-effective manner is one of DirecTV’s priorities, according to interim CEO Larry Hunter.

Meanwhile, DirecTV is also adding features to bring value to its video product. Interactivity, through products like ScoreGuide, are gaining in popularity, Shanks said. ScoreGuide allows customers to track scores and schedules of all major sporting events. Customers can see a lineup of games in progress as well as upcoming events, and lets them tune into those channels directly by pushing a button on their remote. Viewers can leave ScoreGuide open on their screen as a way to track the score of a specific game. A TV apps store — similar to Apple’s iPhone applications service — is currently being beta-tested.

“It’s all about getting information and convenience,” Shanks said. “If … you want to know everything there is to know about the Yankees, you go to the Yankees app. If you have a Flickr account, you can go there and download all your photos to your TV.”

To compete with cable companies’ video-on-demand offers, DirecTV is also fine-tuning its own VOD version by marrying satellite and Web technology. Programs are downloaded via the Web to customers’ DVR boxes. Shanks conceded that it’s not cheap to deliver on-demand programming that way, but said the ultimate goal is customer convenience. Researchers found a significant number of customers’ TV sets were either already hooked up to the Web or the Web connection was nearby, he said. Shows can also be downloaded to DVRs using wireless adapters.

“We really haven’t pushed the gas on this product yet,” Shanks admitted. “We’re still trying to figure out some of the economics. It’s only eight months old, but the people who have hooked up have been blown away and their usage has exceeded expectations.”

DirecTV is also using interactive technology to generate ad revenue. Last year, the company recorded over 1.5 billion interactive impressions and that number is set to double this year, according to Shanks. DirecTV has run interactive ad campaigns with companies including Lipton and Klondike Bars.

“With this experience, we are finding our advertisers getting an average two minutes, 20 seconds of exposure,” Shanks said. “Those are fantastic numbers for advertisers.”

September