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DirecTV Reports Blockbuster Quarter

11/07/2011 12:01 AM Eastern

DirecTV helped squash the notion — at
least for the time being — that basic video-subscriber
growth is dead, reporting its strongest quarter of domestic
net new subscriber additions
in seven years last week.

The nation’s No. 1 satellite-
TV provider — which, like cable
operators, has had to deal
with a maturing video customer
base — blew through analysts’
third-quarter estimates of
203,000 net new additions, adding
327,000 net new subscribers.
That’s nearly double the
174,000 additions in the same
period last year.

At the same time, gross additions
topped 1.28 million, another
seven-year best.

As DirecTV was racking up
the gains, many of which were
fueled by a promotional offering
on its “NFL Sunday Ticket”
out-of-market package, cable
operators were on the other
end of the spectrum, making
strides to reduce their basicvideo
losses.

At Comcast, which reported
third-quarter results Nov.
2, basic-subscriber losses were
lower than expected at 165,000
households, compared to a loss
of 275,000 basic-video customers
in 2010. It was the fourth
consecutive quarter of reduced
basic video losses at the cable
giant.

The growth for Comcast and
other cable operators was in high-speed data, outpacing
estimates with 261,000 additions in the period, vs. 249,000
additions in 2010. Phone -ustomer growth, following a
trend of its publicly traded peers, was slower than expected
at 133,000 subscribers, down from the 228,000 additions
last year.

Charter Communications also showed a slight improvement
on the basic-video side, losing 65,000 in the quarter,
compared to the 66,000 it lost in the
prior year.

More encouraging was that the
smaller-market MSO continued to
add to its non-video customer rolls
— it added 54,900 in the period, double
those of the previous year.

Collins Stewart media analyst
Tom Eagan said the Comcast results
“should help revive sentiment in the
sector,” which had been reeling from
disappointing showings from Time
Warner Cable and Cablevision Systems
late last month.

DirecTV’s performance is also in
glaring contrast to cable, which has
been losing basic-video customers
since 2002. While the industry has
obviously matured, the satellite giant
has managed to tap another vein
for growth. About half of its gross additions
came from cable operators,
the company said.

Wunderlich Securities media analyst
Matt Harrigan said the DirecTV
growth puts cable’s efforts in a different
light, adding that it can’t simply
be written off as a one-time promotional
glitch.

“This is not some ephemeral passing
effect on the Sunday Ticket,”
Harrigan said. “DirecTV has never
had a negative quarter. They still
have the best video brand.”

But Harrigan also said he was
encouraged by Comcast’s performance,
adding that cable operators in general can continue
to lose video customers as long as they can eke out
sufficient pricing and bundling growth.

DirecTV began offering the Sunday Ticket promotion in
July, when a looming player lockout threatened the entire
National Football League season. Although a labor agreement
was reached in August, the promotion, which would
allow customers to receive the package at no extra charge
for the first year if they committed to purchase its Choice
Extra package or higher level of service, is available until
Nov. 23.

While there is always the danger that subscribers enticed
by the Sunday Ticket promo will leave after their
obligation expires, DirecTV CEO Mike White said on a
conference call with analysts that the new additions seem
stickier. According to White, about 80% of the net new subscribers
have also taken advanced services like wholehome
digital video recorders.

And White’s optimism extended to DirecTV’s ability
to re-sign many of those additional customers to
the Sunday Ticket package next year when the promotional
period rolls off. White estimated that typically,
DirecTV has about 300,000 customers each year it
needs to convince to renew Sunday Ticket. That pool
has more than tripled to 1.1 million customers after
the promo.

“That’s a much better pool,” White said. “It’s premature
to see what we will do next year, but we are pleased with
the results.”

 

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