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UPDATE: DirecTV Signups Short of Goal

15 Jun, 2001 By: Joan Villa

DirecTV has signed up only about half the new subscribers it anticipated forthe second quarter, forcing parent company Hughes Electronics Corp. to slashprevious projections of satellite TV growth for the year.

In providing the revised figures, Hughes c.e.o. Jack Shaw blamed a “softening economy” for slower-than-expected DirecTV sales at retail outlets such as Circuit City and RadioShack, along with a decline in newsubscription signups in rural areas. He also acknowledges the company was “distracted” by recent negotiations aimed at merging DirecTV with asatellite unit of News Corp.DirecTV now says it will add 175,000 new subscribers in the quarter ending this month, down from previous projections of 275,000 to 350,000, and 1.3 million for the year, versus prior estimates of 1.5 million to 1.7 million.

Latin American growth will fall more dramatically, to 25,000 new customers for the quarter versus projections of 100,000. DirecTV projects a total customer base of 10.8 million subscribers by year end.

Analysts also point out that to hit even its lowered forecast, Hughes must capture 60% of its annual sales in the second half, compared to 53% in the last six months of 2000.

The drop in consumer electronics store traffic created a “substantialshortfall” for DirecTV, explains analyst Matthew Harrigan, who follows Hughes for Janco Partners Inc. “Some is the economy, some is the maturation of the satellite adoption curve, and some is poor tackling and blocking inrelation to EchoStar,” the No. 2 satellite service, Harrigan says. EchoStar has “fared much better,” already adding 280,000 subscribers out of a target360,000 for the quarter, which gives the DirecTV rival a total customer base of 6 million, he says.

Blockbuster, which began selling DirecTV systems in September, declined to comment on whether its DirecTV sales have skidded so far this quarter. Aspokesman says the video retailer’s policy is to release subscription numbers annually. It last reported sales Dec. 31 of more than 100,000 systems.

DirecTV will turn to an aggressive marketing plan targeting cable customerswith rate increases or poor or less competitive service, the company says. And Shaw promises that DirecTV’s biggest subscriber season traditionally falls in the third quarter.

Harrigan says a cable campaign may help drive new signups but won’t compensate for a soft economy as effectively as a trip to the local video store. Satellite will only become a more significant competitor “as you get more channel capacity and more pay-per-view offerings,” he says, “but right now they don’t have the broad selection of the video store.”

Direct broadcast competitor Pegasus Communications last month made a similarsubscription warning, revising growth to 150,000 new subscribers from priorforecasts of 180,000 to 260,000.

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