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DirecTV CEO Won’t Chase ‘Lower Quality Subscribers’

In a recent chat with investors, new DirecTV CEO Michael White, a former Pepsi executive who joined the company on Jan 1., laid out his vision for the satellite leader after a fourth quarter loss after absorbing certain entertainment assets spun off by Liberty Media Corp.

White was asked if he was looking at the business in terms of balancing revenue growth or free cash flow and earnings.

“I’m frankly more interested in how we create passionate loyalty out of our consumers for life, than necessarily chasing lower quality (subscribers),” says White. “We recognize the industry has gotten a bit more competitive in the last six months and we are fine-tuning our own strategies accordingly.”

White added: “But at the same time I think DirecTV has been very good about trying to consciously manage and strike the appropriate balance … to ensure we continue to deliver strong cash flow to our shareholders.

“So I guess my view is I think it’s a bit of both, unfortunately. We’ve got to both be competitive but at the same time I think it doesn’t do anybody any good to chase poor quality (subscribers), and I think it’s that delicate balance that, if you will, we will continue to strike as we head into this year.”

DirecTV added 119,000 subscribers in the United States during its fourth quarter loss, which is less than the 301,000 it added in the period a year earlier.

Kaufman Bros analyst Todd Mitchell forecasted that DirecTV would add 200,000 subscribers.

The television provider also announced a new share buyback of $3.5 billion as its free cash flow grew 40 percent to $2.4 billion.

“The thesis for owning DirecTV shares is they would decelerate sub growth, accelerate free cash flow growth leading to an equity shrink and that’s what they’ve done,” said Mitchell.

“DirecTV will try balancing giving discounts to win subscribers from cable rivals while maintaining its premium brand image in a market that has become even more competitive,” said  White.

2 Responses to “DirecTV CEO Won’t Chase ‘Lower Quality Subscribers’”
R Curb - March 1st, 2010 at 9:57 pm

I am surprised that the CEO is considering “lower quality” subscribers not worth while. Maybe he truely does not understand why some customers are staying “lower quality”. I have been with directv for 3 years after leaving Dish after 7 years. I have tried to upgrade with Directv but refuse to pay the outrageous fee for the HDTV box in addition to the additional 2 year commitment. I am not complaining about the $10 monthly fee – that is 100% agreeable. I don’t have a contact and refuse to sign up for 2 years just to pay $200 for a HDTV box. Hubby has been doing without for over a year and that equals to a loss to Directv of $150 in HD fees. It is not just about adding subscribers and then mistreating them. I am glad your numbers are so disappointing. Maybe it is time to wake up and treat the customers you already have a lot nicer with good deals to keep them. And let’s not even talk about leasing a box only to have to pay to have it fixed or replaced! So disappointed….

[…] have Dish’s TV packages been so low? Ergen blames the war with DirecTV, who has stumbled in fourth quarter earnings. The two satellite giants have engaged in discounting […]

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