DirecTV Hikes Rates
Satellite Television Operator Price Increases to Take Effect March 4
By Todd Spangler -- Multichannel News, 2/9/2009 10:35:06 AM MT
DirecTV will raise monthly rates on programming packages an average of 4% effective March 4, and while the increases are in line with other video providers one Wall Street analyst said the satellite leader could be more vulnerable to "recession-related downgrades" than cable competitors.
DirecTV's Select package, for example, will increase to $48.99 per month, up 6.5% from $45.99 previously. The Plus HD-DVR tier is being hiked to $75.99 per month, up 4.8% from $72.99.
The Basic tier will be $12.99 per month, a 30% increase $9.99 previously, while the Family package will remain unchanged at $29.99 per month.
According to DirecTV spokesman Robert Mercer, the new pricing reflects the increasing cost of programming as well as the "significant investments we've made to enhance our customers' viewing experience."
As examples, he cited DirecTV's recent launch of more than 20 new channels, including MLB Network, Cartoon Network West and Fox Business Network, and an HD lineup that now tops 130 channels.
Sanford Bernstein senior analyst Craig Moffett, in a research note Monday, said DirecTV's price hikes come on the heels of similar increases at Comcast, Time Warner Cable, Cablevision Systems, AT&T and Dish Network.
"[T]he magnitude of DirecTV's price increase is in-line with its historical price increases, despite the troubled economy, and suggests that -- despite fears -- price competition in the video industry does not seem to be escalating," he wrote.
However, DirecTV is more reliant on video than cable operators are for per-subscriber growth, Moffett said.
"Weighing on the pay TV stocks has been a generalized fear that investors will downgrade their service packages," he said. "On this score, DirecTV may, over the long run, be more vulnerable to recession-related service downgrades than its competitors given DirecTV's more significant reliance on 'discretionary' services."
Discretionary items comprised nearly 32% of DirecTV's third quarter 2008 average revenue per unit, compared with only about 21% of Comcast's video ARPU for the same period, according to Moffett.
In addition, Moffett also pointed out, DirecTV is raising pricing on many of its premium add-on services, including movie channels (e.g., an additional 99 cents per month for a single premium selection) and Distant Network Service (an additional $0.51 for one or two network feeds).
DirecTV is scheduled to report fourth quarter and full-year 2008 results on Tuesday, Feb. 10.http://www.multichannel.com/article/...ikes_Rates.php