DirecTV Group Inc., the nation's largest satellite TV provider, said Thursday that first-quarter earnings fell 46 percent even as subscriber growth hit a four-year high. The recession was largely to blame: The company increased promotions and customers pared their spending for premium channels and pay-per-view.
In an interview with The Associated Press, DirecTV Chief Executive Chase Carey said he expects intense competition to continue in the pay-TV business, as providers jostle for consumers who have become more sensitive to price in this economy.
Still, he predicted that customers will cut their spending to only a certain point because they "care about quality TV. It is a rich experience. It's not a commodity." For the rest of the year, DirecTV plans to strike a better balance between promotions and customer retention and growth.
DirecTV said Monday it will combine with the entertainment unit of Liberty Media Corp. _ its controlling shareholder _ to form a new publicly traded company. Carey wouldn't completely dismiss speculation that DirecTV might be bought by a phone company. "Our goal is to build DirecTV to its full potential," he said.
In the first quarter, the El Segundo, Calif.-based company earned $201 million, or 20 cents per share. That was down from $371 million, or 32 cents per share, a year ago.
Revenue climbed 7 percent to $4.9 billion. Analysts expected profit of 33 cents per share on revenue of $4.96 billion, according to a Thomson Reuters poll. Estimates usually exclude one-time items.
DirecTV's net new subscribers surged 67 percent to 460,000, while its customer turnover rate hit a 10-year low. DirecTV credited its package of high-definition TV, interactive, sports and digital video recorder services. The company now has 18.1 million subscribers.
But subscriber gains came at a cost. Because of discounts, monthly revenue per subscriber rose just 1 percent to $80.35. UBS analyst John Hodulik said DirecTV had previously projected a 2 percent to 3 percent increase.
Shares of DirecTV fell 25 cents to $24.08 on Thursday.
Looking ahead, DirecTV expects net subscriber growth to exceed 1 million this year. But monthly revenue per subscriber will grow more slowly, at a pace of 2 to 3 percent instead of at least 4 percent previously forecast.
Major DirecTV rivals, the cable TV companies, are ramping up Internet speeds in an effort to lure more customers. Carey said DirecTV does not intend to own a broadband business, but instead will look for more opportunities to partner with wireless phone companies as they launch faster networks.
