UPDATE, 11:30 AM: DirecTV shares are up 6.3% after it reported better-than-expected sub growth in 3Q — and a three year extension of its deal with AT&T to sell co-branded TV, broadband, and wired and wireless phone services in 22 states. The agreement, which now runs through March 2015, covers areas where AT&T does not offer its U-verse video service. There’s “no material change” in the terms, DirecTV CEO Mike White told analysts in a conference call. He added that it’s “too soon to say” whether DirecTV will offer more bundles with Verizon broadband services. “The question will be how customer friendly the (Internet usage) caps are.” White says he talks to everybody about packaging broadband service with DirecTV — and that could include Dish Network if it uses the wireless spectrum it’s amassing to sell a wireless Internet service. DirecTV is “thinking about the cloud and where you use IP with the satellite in a hybrid model” and having two pipes to the home — one for TV and another for broadband — “is of vital importance to our strategy. Almost all of the TV Everywhere stuff is linked to that.” The big issues involve programming rights, not technology. But White says that DirecTV is preparing for the cloud-based services to grow quickly. “You’ll see a little bit of the future in our (new) HD user interface” which will offer search engines, program recommendations and poster art for movies. “It’s a more Apple-like experience.”
White didn’t provide much detail about his new programming deal with Fox, which covers all of its cable and broadcast properties and begins in January. “We’re pleased with the deal we got….There was compromise in this case.” But he lamented how much programming prices are rising: He expects DirecTV’s overall payments to increase by high single digit percentages through 2012, which is “higher than we originally anticipated.” That could backfire on the industry. “The content providers can’t be successful by making the content distributors unsuccessful,” White says. “I still believe the consumer is king and it’s going to be an issue for us collectively if we don’t figure it out.”
PREVIOUS, 4:54 AM: The satellite company’s ambitious NFL Sunday Ticket promotions and expansion efforts in Latin America pretty much delivered in 3Q. The company reported net income of $516M, up 8% vs the quarter last year, on revenues of $6.84B, up 14%. That revenue figure topped the $6.74B that the Street expected. Earnings, at 70 cents a share, fell short of the 73 cent forecast. The company says its profit took a hit from higher programming costs, including its new NFL contract, and higher subscription acquisition costs. But at least the customer acquisition effort paid off: DirecTV ended the quarter with 19.76M U.S. customers — up 4% from last year, making this the company’s best 3Q in seven years. At the same time, average monthly subscriber payments increased 3.6% vs last year to $92.21. Price increases for DirecTV programming and leased set top boxes outweighed the NFL promotion discounts. In Latin America, DirecTV ended 3Q with 7.28M customers, up 34% from last year. CEO Mike White says that “we plan to build on this momentum by debuting several compelling new products and services including a greatly enhanced DirecTV Anywhere offering that will enable consumers to stream live-TV programming and on-demand movies to their mobile devices, as well as a brand new HD user interface and the much anticipated launch of our home media center.”
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