Are DirecTV's operations and vision eroding?
How much longer will DTV retain their rapid growth and #1 customer satisfaction rank?
DirecTV (DTV) is getting smacked for a few % after lowering '05 and '06 sub-growth and raising excepted subscriber acquisition costs. Frequent mail "guest" (read: my occasional ghost writer) Johnny Quest weighed in with some thoughts after listening in on the conference call:
"DirecTV (DTV) lowered its guidance for sub growth for the next 24 mos, and raised SAC expectations. The qtr was another nightmare of write-offs, divestments, etc. DTV added 345K DVR subs for the qtr ended Dec 04. Interestingly, TIVO (TIVO), analysts are expecting upwards of 420K DTV subs in TIVO's qtr ending Jan 05. Obviously, the sales rate would have to accelerate in Jan 05 for TIVO to hit these numbers for DTV subs. 345K was the most DVRs DTV has ever added in a qtr, which makes you wonder why they'd be dumping a product (TIVO) when it hasn't even hit maturation. In the attached transcript, Stern or Carey says that TIVO's HD box "...is the better machine vs. cable offerings. Truly bizarre.
On set top box side, DTV is talking about this multi-room media center. I don't know how that won't be:
- A complete logistics nightmare, due to DTV's current corps of installers as well as the bugginess of software and multiple platform networking.
- A huge increase in SAC. This new box has to cost multiples of the current Series 2 combo, not to mention the fact that it might require even more wiring.
Two other notable STB developments are the launch of an enhanced DVR product as well as a leasing model to pay for the higher cost STBs. Why on earth DTV would move to the leasing model cable companies use, when they've had tremendous success getting customers to pay upfront at retail, is beyond me.
Two quarters in a row of higher costs and higher churn (1.6%) make me believe that these guys do not understand the business or are even worse at execution than the old management. Add to those concerns all the stories of deteriorating customer service and poor installation. I still don't know why DTV Latin America remains under the DTV umbrella. Why would you add those assets, plus the Sky assets, to the largest subscriber base in the NWS family? It's just too big of an entity, in my opinion.
Chase Carey may end up breaking this thing before he figures out how to fix it."
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