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DirecTV CEO Blames Hollywood for Sluggish VOD Sales

4 Aug, 2011 By: Erik Gruenwedel

Strong Latin America growth masks ongoing recessionary impact on U.S. operations; ends quarter with 30 million global subs

The CEO of satellite TV operator DirecTV Aug. 4 said a slate of underwhelming theatrical movies contributed to subscribers shying away from its transactional video-on-demand movies and other premium content.

CEO Mike White said DirecTV continues to be on the forefront of offering premium video content, including premium VOD and 3D.

The company did not disclose results from premium VOD, the platform launched in April that allows subscribers to rent movies eight weeks after their theatrical release for $29.99.

“I think this has more to do with titles coming out of Hollywood that didn’t really work with consumers,” White said, adding that DirecTV remained bullish on VOD and TV Everywhere.

Indeed, White said premium video revenue in the quarter was 10 times that of pay-per-view, despite the relatively small size of the market.

“We weren’t down versus a year ago; we just weren’t up 20% [like] we were in the first quarter,” he said.

When asked whether he would consider offering Hulu to broadband customers, White said the jury was out regarding what kind of revenue Hulu’s business model could generate for DirecTV.

“What we’re looking for is there something there that would enable us to accelerate our TV Everywhere,” he said. “It’s critically dependent on the distribution relationships it has and the contracts that underpin that.”

White said Hulu was not something DirecTV absolutely needed, but rather an interesting idea. He said the satellite operator’s NFL Sunday Ticket Go product underscored its ability to deliver content via the Web.

“Our technical guys are quite comfortable with that world,” the CEO said, adding that the challenges going forward lie more with content rights than technology.

DirecTV reported second-quarter (ended June 30) net income of $701 million, up 29% from net income of $543 million during the previous-year period.

El Segundo, Calif.-based DirecTV attributed the results in large part to substantial growth in revenue and operating income in Latin America. Revenue in the region increased 46% to more than $1.2 billion from $857 million last year. Operating income increased 72% to $241 million from $140 million last year.

DirecTV Latin America, or DTVLA, realized an increase of 472,000 subscribers, compared with DirecTV in United States, which saw an increase of just 26,000 subs — down from an increase of 100,000 subs during the same period last year. DTVLA ended the quarter with 6.7 million subs, compared with 5.2 million subs last year.

DirecTV in the U.S. with 19.4 million subs compared to 18.7 million subs last year.
The South American results seem to support efforts by Netflix to expand streaming service to 43 countries in the region, including the Caribbean and Mexico later this year.

DirecTV said the domestic results also underscore the ongoing impact of the 2008 economic recession, which the government and analysts now say was worse than previously reported.

“While a challenging economic and competitive landscape continues to impact DirecTV U.S., the substantial and growing contributions from [DirecTV Latin America] combined with our share repurchase program drove strong [earnings per share] growth of 52% in the quarter,” White said.

Indeed, DirecTV is not charging a premium for access to its NFL Sunday Ticket football broadcasts this coming season.

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