CFO: DirecTV Better Than Netflix — in Latin America14 Sep, 2012 By: Erik Gruenwedel
CFO Pat Doyle tells investor group No.1 satellite TV operator would be interested in merging with No. 2 Dish Network
With more than 9 million subscribers in Latin America generating $224 million in operating profit during its most recent fiscal period, DirecTV believes its satellite TV service and nascent on-demand movie platforms trump Netflix entry into the market, CFO Pat Doyle told an investor group.
Speaking Sept. 13 at the Bank of America–Merrill Lynch Communications, Media & Entertainment Conference in Beverly Hills, Calif., Doyle said Netflix’s troubles with broadband infrastructure, credit card payments and other issues in Latin America underscore the challenges of the region.
Netflix recently revealed reaching 1 million subs in Latin America — a tally that trails its service in Canada and matches the subscription video-on-demand pioneer’s most-recent foray into the United Kingdom and Ireland in January.
Doyle called Netflix a “non-event” thus far in regards to being a viable competitor to satellite TV in Latin America.
“With the relationships we have with local content owners, [our CEO] feels like we have a much better product than Netflix has right now,” Doyle said, adding that the dearth of broadband penetration in the region won’t be solved in the near term.
The CFO said DirecTV has superior content license deals with studios and local media holders — a reality he said stymies outside competitors even as strong as Netflix — from entering the market. DirecTV also recently launched an on-demand movie service that allows subs the ability to watch new releases via satellite or over the Internet.
Indeed, while the average monthly revenue per Latin America subscriber for DirecTV tops $57 compared to around $8 for Netflix, DirecTV offers lower cost bundles of TV programming, sports and movies in Spanish priced from $4.99 a month. Netflix does not carry live sports programming.
“We don’t feel like [Netflix] would be a threat, even if they had gotten off to a good start and had great content,” Doyle said.
Meanwhile, the CFO said DirecTV would be willing to consider a merger with No. 2 satellite operator Dish Network if the regulatory environment was conducive. Dish chairman Charlie Ergen had floated the idea if the Federal Communications Commission approved the proposed merger between AT&T and T-Mobile. The FCC denied that merger.
“We were certainly hoping for some clarity on the AT&T-T-Mobile deal,” Doyle said. “Obviously, we didn’t get the clarity that we were looking for.”
He said there is a lot of value to the consumer and corporate synergies of a combination between Dish and DirecTV. Both companies have primarily focused on delivering multichannel video content to subs, with DirecTV co-opting with Verizon’s FiOS TV and AT&T’s U-verse for telecommunications subs.
Indeed, about 3 million DirecTV households have broadband connectivity through a third party, with 4 million projected by 2013, Doyle said, adding that the service is comfortable using somebody else’s pipe for its customers’ high-speed Internet needs.
“We’ll see how the elections turn out and if that changes people’s views [regarding a merger],” Doyle said. “That’s a combination that would be good for the consumer and should get done. We would be interested in that opportunity if it was achievable.”