DirecTV Seeking Path to Bring Wireless Broadband to Market, CEO Says
DirecTV’s wireless broadband strategy hinges on the satellite company finding enough spectrum and lowering deployment costs, CEO Michael White said Wednesday at the Goldman Sachs investor conference in New York. While DirecTV tested a fixed-line LTE service with Verizon in 2011 through a small number of homes in Pennsylvania, it “isn’t clear yet” that wireless broadband technology is ready for wholesale distribution in the U.S., White said. The Pennsylvania homes used a device that attached to a satellite dish to receive a 4G signal from a cellular tower. Dish Network, meanwhile, has invested heavily in wireless spectrum, having purchased wireless spectrum in the 2 GHz band with the acquisitions of TerreStar and DBSD.
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"We continue to look at technologies, but you have to have sufficient spectrum of the right particular quality,” White said. “Every time we model it out, it’s a $15 billion to $20 billion investment and about half the customers would take it. You do the math."
DirecTV also is continuing to weigh its options for subscription video-on-demand (SVOD) following its failed bid for Hulu, White said. Hulu, which has more than 3 million subscribers and had $700 million in revenue in 2012, ended negotiations earlier this year after current owners 21st Century Fox, Disney and NBCUniversal agreed to invest another $750 million in the streaming service. In SVOD, DirecTV won’t pursue a broad service to compete with the likes of Amazon and Netflix, but rather a “targeted” over-the-top offering that enables the satellite service to “selectively play in that space,” said White, who didn’t disclose details. Standard VOD is part of all content negotiations and 70 percent of DirecTV’s programming from 40 networks is available on-demand, White said. “I expect we will add more to that next year,” he said.
DirecTV is continuing to battle the cost of content, which is expected to increase another 50 percent this year. DirecTV wants to hold the line this year to “high single-digit” increases in retransmission agreements and expects those to moderate “over time,” White said. Because of increasing content costs, DirecTV will likely boost subscription fees in 2014, White said. White didn’t disclose the size of the increase, but said it will be less than the 4.5 percent imposed this year. While federal regulators have been reluctant to approve mergers that narrow a field of four competitors in a given industry to three, consolidation among satellite and cable companies would help as a hedge against rising content costs, White said.
DirecTV also plans to ship the HD44 satellite receiver this fall, which will bring a “significant reduction” in manufacturing costs, White told us. White declined to disclose the size of the cost reduction. The HD44 -- a second-generation Genie DVR/satellite receiver -- has many of the same features as the HD34, including five tuners and one terabyte of storage, but upgrades to a faster processor, company officials said. The HD44 is expected to be priced around $300 for existing customers and be free for new ones. The DirecTV satellite receiver/TiVo DVR combo will continue be offered to customers as a “secondary option” to the Genie, White said. “We have a relationship with them and we will continue it, but for many years 98 percent of the boxes we sold were our own and we continue to innovate them and that’s our primary focus,” White told us.
The satellite service also is continuing negotiations with the NFL on a new NFL Sunday Ticket package, the agreement for which expires in 2014, White said. White expressed optimism that the pact would be extended, although the NFL has indicated it might seek separate deals for other technologies, including mobile, analysts said. DirecTV also is trying to resolve technical issues that have plagued the Web-based streaming component of Sunday Ticket. DirecTV has about two million subscribers to the service, which charges $224 for the season for the basic service and $295 for the addition of streaming. NFL Sunday Ticket online and streaming both suffered “technical issues” during the first two weeks of the season, DirecTV officials have said. NFL Sunday Ticket streaming went down for about an hour for each of the first two Sundays of the NFL season. DirecTV last paid about $1 billion for the rights in 2009 for NFL Sunday Ticket, which generates slightly under $600 million in annual revenue for the satellite service, Goldman Sachs said in a research note.