DirecTV loses subscribers … on purpose

Aug 02, 2012

FORTUNE -- For the first time since it was launched in 1994, DirecTV (dtv) lost more subscribers than it gained in a quarter. A loss was expected, but it was greater than analysts had forecasted: 52,000 compared to the anticipated 36,000.

In part, this is purposeful: DirecTV is concentrating its efforts on customers who spend more -- for example, by applying stricter credit standards and by marketing its pricier service tiers more heavily. This is a long-run play, with DirecTV positioning itself as a premium service as television choices grow in number and complexity. These are "wise, economic consumer retention efforts" said ISI's Vijay Jiyant in a research note on Thursday.

And in fact, revenue per user rose a healthy 4%, from $90.58 in the same quarter last year to $94.40.

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The No. 2 satellite service, Dish (dish), might be a beneficiary of DirecTV's strategy, and the lower-priced service lost just 10,000 subscribers in its most recent quarter. That's better than was expected and way better than the 135,000 subscribers it lost a year ago.

Time Warner Cable also reported a net loss of subscribers on Thursday, of 169,000 -- more than had been expected. But thanks to additions of customers for its voice and broadband Internet services, profits were up by 7.6%, to $452 million on revenues of $5.4 billion. Despite the company's earlier claim that flat-rate broadband pricing wasn't sustainable, and the industry would have to move to usage-based pricing, "there continues to be no evidence of that," declares DSL Reports, citing the company's Internet-driven profits.

Comcast (cmcsa) on Wednesday reported that it lost 176,000 cable subscribers, down from 238,000 a year earlier, and a better-than-expected number. Meanwhile, Comcast added 156,000 broadband subscribers. Some analysts have cited the near-abandonment of landline broadband services by telcos AT&T (t) and Verizon (vz) for the cable industry's gains in Internet subscribers.

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