Why is DirecTV's growth slowing?

As long as customer service remains solid, the company should be able to achieve the revenue growth it wants.

By Trefis Feb 20, 2012 5:00PM
DirecTV's (DTV) U.S. subscriber growth has dramatically slowed down, though it's still remarkably healthy considering the housing market and the saturation in the pay-TV business.

The No. 1 satellite pay-TV service provider in the U.S. claims it's seeing a higher customer turnover rate due to a dispute with News Corp's (NWS) Fox as well as better performance by its peer Dish Network (DISH). See our complete analysis for DirecTV.


DirecTV Pay TV Market Share

Subscriber gains remain solid


DirecTV gained 125,000 net U.S. subscribers in the fourth quarter -- healthy growth given the saturation in pay-TV market and a sluggish housing market. Still, those additions pale in comparison to the 327,000 net subscriber gain in the third quarter and the 289,000 in the last quarter of 2010. The quarter-over-quarter decline in net additions was about 61% and year-over-year decline was about 57%.



We believe that heightened competition is to blame. Dish Network has been trying to recover from a slump in growth, with the help of Blockbuster, and Comcast (CMCSA) subscriber losses slowed a great deal in the fourth quarter.


Going forward, competition will only get stronger and subscriber growth will become more difficult for DirecTV.


What to expect in 2012


The company expects U.S. revenue growth will primarily come from a bump in per-user revenue rather than in the number of subscribers. Higher revenue per user will result from price increases from higher programming fees as well as greater usage of pay-per-view and premium movie channels.


As long as DirecTV's customer service remains solid, the company should be able to achieve the required per-user revenue growth. But being a stand-alone provider of pay-TV services is growing increasingly risky, and DirecTV may need to make a push into broadband. We are in process of updating our pricing model for DirecTV in light of these recent results.


Our price estimate for DirecTV stands at $53.26, implying a premium of more than 15% to the market price.

44Comments
Feb 20, 2012 6:03PM
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They should treat there current customers better and give them deals instead of giving all the deals to the new customers, new customers get those deals and are more incline to switch to other cable providers after the contract is up because of a deal they are offering. Long term customers means more profit.

 

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considering the amount of tinkering that they do with channels, it would be little doubt that

many are tired of the foolishness.

 

one realizes dish does the same thing in selling a package and then beginning to peel off

stations to try and "encourage" upgrading to a more expensive package; but it is still an

irritant. the response from customer service=  tough.

 

can only hope ftc finally starts thinking about consumers and allows a choice of what the

buyer wants instead of a plethora of crappy channels to get a few good ones.

Feb 20, 2012 6:14PM
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I have Dish - as soon as my contract is up, I'm gone.  I'm tired of paying for stations that Direct and Dish are paid to carry, like RFD TV.  I'm tired of paying for shopping channels I never use, I'm tired of paying for all the Religious stations with that get a free ride while they hustle for money, I'm tired of paying for the Spanish, Chinese, Arab stations I never watch, I'm tired of paying for the "Must Carry" stations that play Thai kickboxing programming at midnight and most of all I'm tired of paying for the "free" movie channels, here's looking at you Encore, that have one button in their programming, it's called recycle.
Feb 20, 2012 6:59PM
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I wont get directv out of spite. They gave me a 4 hour window to hook me up. After 3 1/2 hours i walked down the street to grab something to eat since the 4 hour window was 10-2pm. The guy showed up as i was walking back and i caught him pulling out of my driveway. He said he had already cancelled my appt since i didnt answer the door and I'd have to reschedule again. I said forget it and went with cable, which gave me a 2 hour window and got me hooked up much cheaper. Im expected to wait 4 hours but they cant wait 5 minutes? BS.
Feb 20, 2012 6:22PM
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Poor treatment of long time subscribers,No incentives for staying just more increases in price. Customer service is a Joke, nothing free it all cost, How many years do you still pay rent on eQuiptment you payed for 100 times over. Price is just too much. About to lose another long timer, Hope you stay in business, look at what happen to BlockBuster.

 

Feb 20, 2012 6:25PM
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Bobalou. I agree completely. When I recently quit DTV, they informed me that they were willing to cut my bill by $46/mo. I told them they should be charging that way BEFORE customers leave them. And Sunday Ticket has gotten so costly I'd rather spend the money at BW3's on wings and beer to watch my team than watch in my own home where the beer is cheaper and colder.
Feb 20, 2012 7:11PM
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I used to have DirecTV, but cancelled it a couple of years ago.  It wasn't Direct that put me off so much as the pay channels themselves.  I was paying $60/mo (the cheap package) for shows that had huge channel bugs in the corner and promo snipes playing across my show while I was trying to watch it, never mind commercial breaks every 3-5 mins, and it was pissing me off.  I thought, I'm paying for this?  I can get my shows on Hulu or Netflix for much less without all the rubbish on the screen.

 

And like other users, I did lose signal during weather.

Feb 20, 2012 7:20PM
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I was a customer for 10 plus years. Dropped them because they refused to charge me the same monthly fee as a new subscriber.  Makes sence to me if you want your old customers, give them the same price as new customers. Other wise change from one provider to the other, so as to get the cheap price. I'm with Verizon and plan to change again.  Why pay twice for pay t.v. and all the commercials. They should at least keep monthly payment the same. They get paid from the commercial advertizment company too.
Feb 20, 2012 6:21PM
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DirecTV and Dish apparently did not want my business.  The dish needs a clear path to a satellite to work properly.  I called both to ask if they would just stop by and see if my property had a clear spot where the dish could pick up the signal.  Both told me I had to sign up and pay first, and if the dish could not be properly located they would refund my money.  ****-backwards if you ask me.
Feb 20, 2012 8:01PM
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could it possibly be because of the increasing number of infomercial channels? it seems as though every time i tune in there is yet another channel devoted to making my brazilian butt look better.
Feb 20, 2012 6:34PM
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Had Dish then switched to Direct, live on Gulf Coast so get plenty of weather. Overall Direct has been better for me, both are rip offs but becuase of lack of what local cable carries they got you by the short hairs. Don't watch much but what I do want to watch Direct has been the best for me. Rather cable but they just can't get their greedy act together either.
Feb 20, 2012 6:29PM
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yeah i agree they all suck i have direct tv now and ive noticed every year they raise rates around february march im getting fed up and spend more time on my computer anyway so you can get all kinds of free tv online anyway who needs tv anymore.
Feb 20, 2012 6:32PM
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Dropped 'em like a bad habit about five months ago.  Between what I get off the air (and better picture quality, I might add) for free and what I get over the internet, including Amazon Prime freebies, I see no need for any pay service.
Feb 20, 2012 7:35PM
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Canceled them 2 months ago cause they are HORRIBLE, programing, cust serv, etc. they then decided to keep charging me after I canceled and I'm having to take them to court BEWARE of their UNETHICAL practices!!!!!

 

DIRECT TV IS HORRIBLE!!!

Feb 20, 2012 8:03PM
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I've had them for years and quite a few moves.  Was always happy with them until recently when they started jacking up their prices and moving some of the channels I watch to other higher priced packages!

I live out in the country, so I have a choice of DirecTV, Dish, or nothing.  I'm going to have to price Dish, but I doubt if overall they are any better on prices.  Excluding "promos".

Feb 20, 2012 6:28PM
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You need a deluge or fain to lose Dish or even DirecTv. If you are losign signal in light rain Miami then your dish needs to be realigned.
Feb 20, 2012 7:55PM
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I too was a long time DTV customer, nearly 10 years... Dropped them for Comcast, now I have all the premium channels (hbo,sho,cinemax), top speed internet and 30 bucks a month cheaper... I was only asking for a $20 dollar price concession and got no where... then two weeks after I cancelled subscription I get the "come back" propaganda papers with deals i haven't seen printed anywhere. DTV can take a long walk off a short pier.. I will never go back... no price will take away the sting of being lied to.
Feb 20, 2012 7:41PM
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I ran my contract to the end. I asked for a better deal like the were offering to new customers. I was offered a $5.00 discount per month if I signed on for another year? It looks like Im back to comcast
Feb 20, 2012 8:32PM
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My wife and I have been with Direct TV for about 10 years and have never had a complaint one.  I have had to get a new receiver on two occasions and had no problem at all they even set it up so that the old receiver can be returned in the box the new one shipped in.  Thankfully, our experience with their customer service has been A+.  When we go on vacation they are great to work with concerning putting the system to sleep while we are gone.  I guess we have been lucky concerning how negative some of the comments are.  I would recommend Direct to anyone considering our experience with them.

Feb 20, 2012 8:02PM
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I have had them for years, and were very happy,but as money got tight and we needed a break they were not willing to help in any way, went ahead and cancelled due to cost and they are still holding us to the remaining term when things get better I WONT BE BACK
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