DIRECTV to Streamline Expenses - Analyst Blog
November 22 2011 - 3:15AM
Zacks
DIRECTV
(DTV), the largest satellite TV operator
in the U.S. has decided to slash its expenses, mainly on hiring and
programming in 2012, as a precaution for any economic slowdown.
Management is doubtful about domestic economic growth in 2012 due
to precipitous sovereign debt crisis in the European region, which
is generating severe fluctuations in the global economy and
next-year Presidential election in the U.S. Nevertheless, DIRECTV
affirmed that its investments in strategic initiatives such as TV
Everywhere project will remain intact.
In the previous quarter, DIRECTV
generated a significant 327,000 net subscriber addition in the U.S.
However, this was primarily attributable to its promotional package
of NFL (National Football League) Sunday Ticket. The company
offered one-year free NFL ticket subscription for all its new
customers, who opted for its two-year video contract. DIRECTV is
bearing an estimated cost of $1 billion a year to broadcast this
package. As a result, the company’s bottom line suffered in the
previous quarter.
Pay-TV operators are facing serious
threat from online video streaming service providers, such as
Netflix Inc. (NFLX), Hulu.com, YouTube, and
Amazon.com Inc. (AMZN) to name a few. These online
videos provide an extremely cheaper source of TV programming unless
the customer is very eager to see real time programs like sports
events. This business model is gaining momentum especially when the
economy is under recessionary condition.
In a strategic decision, DIRECTV
decided to broadcast its NFL Sunday Ticket TV package on the
Internet. The company is trying to expand the viewership coverage
of football games through broadcasting it online. Subscribers can
now watch NFL matches via Sony Corp.’s (SNE)
PlayStation 3 videogame console, laptops/PCs, and other high-end
mobile devices such as Apple Inc.’s (AAPL)
iPhone.
Furthermore, management has decided
to offer bundled-channel networks excluding the sports channels to
reduce cable TV bills of its customers. Therefore, the subscribers
have the liberty to choose selective channels for which they can
pay less at the same time save money.
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