DirecTV Q2 Churn Takes Hit From Viacom Dispute
DirecTV growth in its Latin American market continues to exceed expectations and it had strong average revenue per user (APRU) growth in its U.S. market, as total Q2 revenue grew 9 percent to $7.22 billion. But the carriage agreement dispute with Viacom last month increased churn, though it allowed the company to stress its concern for keeping prices low for subscribers, DirecTV CEO Mike White said Thursday during an earnings call. Other multichannel video programming distributors also have had blackouts with broadcast and pay-TV programmers amid rising MVPD concerns about increasing content costs. (See separate report in this issue.)
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"Rising programming costs remain our greatest cost challenge,” White said. Through the Viacom dispute, the company showed that it will mitigate growth of programming costs on behalf of customers, he said. “We thought it was important to stand up for the customer.” He said it’s incumbent upon all entities in the market to keep costs down for customers: Everyone in the industry needs “to spend a little more time in customers’ homes and understand what’s going on in their homes in this economy.” DirecTV is willing to make fair deals, he added. “We believe we got a fair deal in the end with Viacom, but we're representing customers first."
The U.S. market Q2 earnings reflects early returns from DirecTV’s long-term strategy of improving customers’ experience and company-wide cost management, White said. The company ended the quarter with 19.91 million subscribers, an increase of 2 percent over the same period last year. Churn and ARPU benefited from more segmented upgrade programs and the company achieved positive results due to cost containment and productivity improvements, he said. The company made progress in wireless broadband opportunities and bid on additional spectrum in the Brazil market, he added. For the U.S. market, ARPU also benefited from strong pay-per-view premium channels and advanced service sales, said Pat Doyle, chief financial officer. VOD movie sales increased 59 percent over the same period last year, he added.
There was some elevated churn from the Viacom incident, Doyle said. The customers that were lost during the dispute were looking for a better deal, he said. “It had less to do with ‘Hey, where’s my MTV,’ and more to do with customers who wanted to use the dispute as an excuse to try to get a better offer somewhere else.”