DIRECTV added 149,000 subscribers in the United States in the last quarter of 2014, after losing 66,000 customers over the previous six months. With a total of 20.35 million subscribers, it ended 2014 with 99,000 more than at the start of the year. In a highly saturated market the total subscriber numbers may appear to be almost static but the reality is much more dynamic.
DIRECTV said the quarterly increase in subscribers, its highest for three years, was mainly a result of increased promotion and the programming disputes affecting the competition, alluding to carriage negotiations at rival Dish Network, which have resulted in temporary blackouts of some channels. This was coupled with a decrease in churn as a result of improved retention and offers to win back customers.
With over 20 million subscribers, even a 1.37% average monthly churn rate, its lowest in 16 years, means the company has to sign up over a quarter of a million customers a month just to stay even. The more customers a company has, the more it needs to sign up each quarter to deal with churn.
The company signed up 3.80 million subscribers in 2014 in order to make a net gain of under 100,000, which Michael White, the chief executive, described as “no small accomplishment in such a mature market”.
Patrick Doyle, the chief financial officer, described the performance of the business in the United States as “one of the best years we’ve put together in quite some time, particularly when considering the significant pressures our business faces on a daily basis”.
He also suggested that passing on the increased cost of programming would raise monthly feeds and could result in greater churn or even a loss of total subscribers during the year.
The company has introduced a number of innovations, such as 72-hour LookBack and Startover services, and a global viewing history, which allows customers to start watching a show on one device and pick up from the same point on another. It was also the first operator to offer a 4K Ultra HD video on demand service and the launch of its latest satellite will provide additional capacity for broadcast services in ultra high definition.
Subscribers may leave a company for many reasons, such as moving house, to switch to a competitor, or in some cases to stop paying for television altogether, either out of choice or necessity.
Reducing voluntary churn, either by increasing customer appreciation and loyalty, or through retention deals, is clearly important, given the significant cost of acquiring a new customer, which is around $750.
DIRECTV spent a total of $2,853 million acquiring subscribers in the United States in 2014 and $1,276 million retaining them.
Average revenue per subscriber in the United States increased 4.7% in 2014 to over $106 a month, due to higher fees as well as increased commercial revenue, partially offset by increased promotional offers to new and existing customers.
With limited opportunity for growth in the United States, DIRECTV has been making steady gains in Latin America.
The DIRECTV PanAmericana operation added 119,000 subscribers in the last quarter of 2014, ending the year with 6.82 million, an increase of 631,000 or 10% over the year.
The Sky Brasil business reported slightly fewer subscribers over the quarter, but was up 272,000 or around 6% over the year at 5.64 million.
The Latin America operation added a total of 903,000 net new subscribers in 2014. This was slightly fewer than the target of a million, in a challenging economic environment.
Overall, the DIRECTV group gained a million subscribers in 2014, with a consolidated total of 32.82 million, excluding Sky Mexico, in which it has a 41% stake.
Total annual revenues increased 5% to $33.26 billion, mainly as a result of higher average revenue per subscriber in the United States and subscriber growth in Latin America.
DIRECTV plans to hopes to gain regulatory approval to close an agreed acquisition by AT&T in the first half of 2015. It is likely to offer bundled services, including television and broadband.
The chief executive of DIRECTV told analysts: “If you take a satellite-first video concept and then you marry it with their broadband, I think you’re going to have a heck of an offer for consumers, which is going to unlock growth opportunities for the company we couldn’t otherwise get on our own.”
Ranked by subscriber numbers, DIRECTV in the United States is the number two operator in the informitv Multiscreen Index of leading pay-television services worldwide. Comcast leads the field and is planning to merge with Time Warner Cable, which would give it around 30 million television subscribers in the United States. The combination of AT&T with DIRECTV would have more television subscribers overall, including the operations in Latin America.