DirecTV Looking At Contingencies in Case of NFL Lockout
DirecTV has starting working on contingency plans for Q3, when it typically markets its NFL Sunday Ticket, to deal with the possible NFL lockout, the company said Thursday during its Q1 earnings call. It’s too early to say exactly how a lockout would affect DirecTV’s earnings, it said. The labor dispute between NFL players and owners threatens to take away DirecTV’s popular NFL Sunday Ticket as a subscription marketing tool, though there are many scenarios over how the fight will play out, said CEO Mike White. Although about a quarter of the company’s Q3 gross-adds took the NFL Sunday Ticket in 2010, observers shouldn’t say that number of subscribers will automatically be gone if the NFL doesn’t play its season, he said. DirecTV is working on other promotions to help deal with the impact of a lost season, he said.
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DirecTV has connected over a million of the company’s set-top boxes in the U.S. to the Internet, though the pace may be a little slow to reach a 2-million-box goal by the year’s end, said White. It’s too soon to understand the differences between connected and non-connected consumers, the company said. While there is some empirical data that says connected users are more likely to use other DirecTV services, there needs to be more size and scale to really evaluate the users, it said.
Combined operations of DirecTV in the U.S. and DirecTV Latin America saw a 13 percent revenue increase to $6.32 billion, compared to Q1, said DirecTV. The full company’s net income was up 21 percent to $674 million primarily due to “higher operating profit, share repurchases” over the last year and $16 million gain on the sale of a 5 percent share in the Game Show Network. DirecTV U.S. reported net additions of 184,000 subscribers to its U.S. business, ending the quarter with 19.41 million subscribers, the company said. Nearly 80 percent of those new subscriptions signed up for HD or DVR services, it said. Revenue was up 3.9 percent to $5.1 billion in Q1, compared to the same quarter last year. The growth was “due to price increases on programming packages and leased boxes, as well as higher advanced service fees,” said DirecTV.
Investor analysts were largely impressed by DirecTV’s financial results in the U.S. and Latin America. “Whatever our reservations about their technology platform longer term, DirecTV remains the best-in-class operator in Pay TV,” said Bernstein Research analyst Craig Moffett. “All in all, their First Quarter was simply another in a seemingly endless string of solid results.”
Meanwhile, federal funds from the economic stimulus plan helped boost Hughes’ subscribership in the first quarter this year, netting 35,000 subscribers, 33 percent higher than the Q1 2010, to reach 612,000 subscribers at the end of the quarter, said Hughes during a Q1 earnings call Thursday. The net subscriber additions are a record for the company, said Hughes. Hughes won $58.7 million of the $100 million that RUS set aside for satellite broadband providers as part of the Broadband Initiatives Program. While the stimulus has been a boon for Hughes, it hasn’t had a huge effect on the competitive landscape, said CEO Pradman Kaul. WildBlue, for instance, has been held back somewhat by capacity constraints on its satellites, he said. ILECs have largely been spending their stimulus funds on middle-mile buildout rather than last-mile, where most satellite broadband subscribers are, said Kaul.
The stimulus funding is expected to continue to help boost subscriber numbers during the next quarter, which is generally slower, and possibly into the third, he said. The regulatory approval process for EchoStar’s purchase of Hughes continues to move forward, he said. The deal has cleared the Justice Department and the FCC proceeding on the deal didn’t generate any objections, he said. The FCC still must give its OK, after which, the purchase can close, he said. Total revenue for Q1 increased 9 percent to $264 million, compared to Q1 last year, said Hughes. Adjusted EBITDA was $58 million in the quarter, up 36 percent since the same quarter in 2010, the company said.