DirecTV ‘Gearing Up’ for Delivering 4K Content, CEO Says

DirecTV, chastened by the failure of its n3D channel, is taking a more conservative approach to 4K, DirecTV officials said. The Space Systems Loral-built DirecTV-14 satellite is scheduled to launch to 99.2 degrees west aboard an Ariane 5 rocket in Q1 2014, while DirecTV-15 follows late that year, DirecTV has said.

While the two new satellites will be capable of delivering 4K, they also could provide increased HD programming, DirecTV Chief Technology Officer Romulo Pontual said. “We have two satellites under construction and only need one of them to be able to have a meaningful increase through both HD capacity and/or 4K,” Pontual said. “We have the flexibility to pick any one of the courses, depending on how that market works. We are ready for whenever the consumers need to go all the way to Ultra HD. Our agenda for Ultra HD, when needed and the time is right, will be much bigger than a simple increasing quality of experience."

DirecTV has trademarked the brands 4KN, 4KNET and 4K Network, but has declined to discuss its specific ambitions in 4K, other than to promise it will be there in a big way as it was with HD. DirecTV will likely face competition in 4K from over-the-top service providers, including Netflix, which has hinted at plans for deploying the technology in 2014. Netflix could potentially partner with broadband providers in its Open Connect network to bring 4K content to subscribers, Netflix officials have said. Sony also launched Video Unlimited 4K in September as a movies-on-demand service aimed at consumers buying its 4K LCD TVs.

For its part, Dish Network is still weighing its options as it waits for the install base of 4K sets to grow, Dish iTV Product Manager Chris Kuhrt told us last week at the TV of Tomorrow conference in New York. “I think it is going to come down to whether some of the programmers are going to provide some content,” Kuhrt said. “Depending on how they deliver it to us, I don’t think there would be an issue putting it up. It’s also whether we get to a point where we have enough customers with 4K TVs and it might require another generation” of the Hopper DVR, Kuhrt said.

In addition to 4K, DirecTV, while “very aggressive” in its bid earlier this year for Hulu, will likely seek niche applications for OTT content, White said. Hulu, which received a new round of funding from existing investors including NBCUniversal and Disney, “financially would have been a challenge” for DirecTV given that it’s a business “that makes no money today,” White said. Hulu posted revenue of $695 million in 2012, Hulu officials have said. DirecTV could have brought some “unique things” to Hulu, including potentially tapping into its subscribers bases in the U.S. and Latin and South America, White said. DirecTV will broadly explore “electronic sell-through” of content including both OTT and subscription video-on-demand, White said.

"Now the challenge in over-the-top is there’s not much out there to buy beyond Netflix and Hulu on a general basis,” White said. And while Intel has been shopping Internet TV business with a price that’s said to be around $500 million, the proposed OnCue service wasn’t a “very good idea,” White said. “What we are looking at are niche ideas,” he said. “If we can find some content rights, and we're already well down that path, the technology is not the challenge for us,” White said. DirecTV already streams its NFL Sunday Ticket package to subscribers and White said he is “optimistic that over the next 12 months, we'll have more to say about” OTT in terms of “what our first priorities are going to be.” For “millennial cord cutters,” seen by DirecTV as a target for Hulu, “I do think there are opportunities there, and so we are going to be opportunistic in looking at that space,” White said.

In response to an analyst question about whether DirecTV might consider having an app on Netflix -- 30 percent of its customers subscribe to the service -- White argued the feature might “undermine” the company’s pay-per-view movie business that produces “nice margins.” As it considered new services, DirecTV spent $300 million this year upgrading “our very best customers, up from an original forecast for $200 million, DirecTV Chief Financial Officer Patrick Doyle said. Much of the increased spending was tied to DirecTV’s Genie DVR, he said. “I am not so much thinking ‘Let’s go become Netflix,'” White said. “I'm trying to think about niche offerings that would particularly appeal to our customers and potentially others.”

DirecTV’s acquisition earlier this year of IP-based home security provider LifeShield could add $300 million in revenue by year-end 2018 with 600,000 customers, Chief Marketing Officer Paul Guyardo said. LifeShield, which had 100 employees and 22,000 subscribers at the time it was acquired by DirecTV, will be rolled out across the satellite service’s network in 2014, DirecTV officials have said. “We have an existing relationship with 20 million homes were we easily cross-sell,” Guyardo said. DirecTV also expects to increase its annual advertising revenue 30-40 percent during the next three years, up from the current $540 million, Guyardo said. The advertising sales will likely benefit from DirecTV’s making audience measurement data available for its HD-DVR customers in Q1, Guyardo said. The satellite service providers also expect to increase commercial service revenue to $1.2 billion by 2016, up from $1 billion this year, Guyardo said. DirecTV struck an alliance with Sonifi, formerly LodgeNet, to market its service to hotels, including offering an HD upgrade with no upfront cost, Guyardo said.