DIRECTV now has over 13 million subscribers in the US and revenue is rising, but the company has reported a loss as the cost of acquiring and retaining subscribers rises. There is also a question over its future relationship with TiVo.
DIRECTV, which is controlled by Rupert Murdoch’s’ News Corporation, said revenue from its record number of subscribers was offset by increased subscriber acquisition costs and higher retention and upgrade costs.
DIRECTV plans aggressive expansion in offering digital video recorders, using promotions to gauge market reaction and attempt to establish a leadership position.
Chase Carey, president and chief executive of The DIRECTV Group revealed that discussions were ongoing with TiVo to address how each company approaches issues such as “advertising, research, and even the degree to which the PVR serves our purpose”.
Carey said that the digital video recorder will be a mainstream product in most homes. However, he added that it would be naive to assume that cable will not respond.
Previously, Abe Peled, CEO of NDS had indicated to analysts that his company had reached a deal to launch its XTV PVR platform next year through DIRECTV. This would overlap with TiVo’s existing contract with DIRECTV to supply PVRs until 2007. However, there was speculation over the future of the relationship with TiVo when DIRECTV disposed of its small equity stake in the company.
Announcing half year results, DIRECTV reported that it had signed up a record 944,000 new accounts in the last quarter, adding 455,000 net subscribers taking into account those dropping the service, exceeding the expectations of most analysts. The numbers were supplemented by additional subscribers gained through acquisitions.
The company recently announced agreements to acquire the assets of Pegasus Satellite Television and subscribers from NRTC.
At the end of June 2004, DIRECTV had 11.6 million direct subscribers, which together with 1.44 million NRTC subscribers gave a total subscriber base of 13.05 million.
Average monthly subscriber churn was reduced to 1.4%, driven principally by an increase in the average number of set-top boxes and digital video recorders per subscriber, as well as increased availability and subscriber purchases of local channels. Average monthly revenue per subscriber was up 7% to $65.00.
While second quarter revenues were up 21% to $2.64 billion, the group still posted a second quarter loss of $13 million, compared to a profit of $22 million for the same time in the previous year.
The figures announced suggest that DIRECTV, as with other satellite operations controlled by Rupert Murdoch, is willing to sacrifice short-term profitability in its pursuit of subscribers.
“We have a singular focus,” said Carey, “to make DIRECTV the best television experience in the United States – and we believe we are well on our way toward achieving that goal.”