Satellite TV operator DirecTV Group Inc. was one of the few pay-TV companies to gain subscribers in the third quarter, though earnings stayed steady because of the higher costs it incurred attracting and serving those new customers. DirecTV said Thursday that a marketing partnership with AT&T Inc. that began in February accounted for most of […]
Satellite TV operator DirecTV Group Inc. was one of the few pay-TV companies to gain subscribers in the third quarter, though earnings stayed steady because of the higher costs it incurred attracting and serving those new customers.
DirecTV said Thursday that a marketing partnership with AT&T Inc. that began in February accounted for most of the increase in U.S. subscribers, but it likely also retained subscribers and gained new ones because of a perennial favorite, the NFL Sunday Ticket package that airs out-of-market games to football fans.
DirecTV, which is controlled by media mogul John Malone’s Liberty Media Corp., has focused on attracting consumers who don’t mind paying more for quality TV as long as they get football and other packages they want.
“DirecTV’s high-end positioning has insulated it from the downturn,” Craig Moffett, senior analyst at Sanford Bernstein, said in a research note. “Among all the cable and satellite incumbents, DirecTV has been the sole provider able to maintain video subscriber growth.”
The company believes the Sunday Ticket is so valuable that in March it agreed to pay the National Football League 43 percent more – to $1 billion a year – to extend the contract another five years.
DirecTV said Thursday that net income was largely flat at $366 million, or 37 cents per share, slightly short of analyst expectations of 39 cents per share, according to a Thomson Reuters survey.
But shares jumped in trading Thursday partly because third-quarter revenue rose 10 percent to $5.47 billion, slightly above Wall Street’s expectations. DirecTV’s U.S. operations posted revenue of $4.7 billion, up 9 percent from last year.
Earnings suffered because of higher marketing and equipment costs to attract and service new customers, though the company said acquisition costs fell on average for every customer it gained.
U.S. customers on average paid $85.32 per month for DirecTV’s services, up 2 percent from last year, in part because of fee increases. The number of subscribers getting both high-definition plans and leasing digital video recorders, DirecTV’s most valuable customers, was up 50 percent in the quarter from a year ago.
“We achieved record high-penetration levels for high-definition and digital video recorder services, which points to our strength at the high end of the market,” interim CEO Larry Hunter said in a conference call with analysts.
DirecTV, the nation’s largest satellite-TV provider and second-largest behind cable TV operator Comcast Corp. in the pay-TV industry, said that after factoring in cancellations, it added 136,000 net U.S. subscribers during the quarter, ending with 18.4 million.
That’s lower than the 156,000 net gains in the same period last year.
Still, thanks to the AT&T deal, DirecTV managed to report a net gain while Comcast, Time Warner Cable Inc. and Cablevision Systems Corp. saw losses. Dish Network Corp. reports on Monday.
Shares in DirecTV, which is based in El Segundo, Calif., rose $1.70, or 6.3 percent, to close at $28.54 Thursday after hitting a 52-week high of $28.75 earlier in the session.
The company, once controlled by News Corp., is on track to be spun off into a separate company in coming months. In February 2008, Liberty Media swapped its 16.3 percent stake in News Corp. plus $625 million in cash for a controlling stake in DirecTV and three regional sports networks.