DIRECTV 2Q13 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“Having said that, rising programming costs, particularly related to large resets and excessive increases in retrans and sports fees, continue to be a significant challenge for our industry overall. We’ll continue to do everything we can to fight on behalf of our customers to keep their bills down and slow these unsustainable cost increases.”

“we experienced unusually high churn in Brazil this quarter due to the fact that in previous periods, certain customers had received retention credits that were inconsistent with our authorized churn policies. Once Sky ceased issuing these unauthorized credits, a large number of these subscribers left the platform. As Mike said earlier, we have taken disciplinary action against those involved, and we’ve made changes to our policies, procedures and our organization to prevent another incident like this from occurring again.”

“I’ll start on the Hulu thing. Hey, look, no question, we were very interested in the asset. And we’re certainly disappointed in the decision that was made to pull it off the market. We made what we thought was an aggressive and attractive bid for it, and we had done a lot of work internally to develop a strategy.”

“I think we are lucky that we don’t face a lot of the issues that DIRECTV U.S. faces. I mean, I think structurally, the 2 biggest differences are, at least to date, we don’t have the issues with retransmission, the retrans issues, and you don’t really have the phenomenon of Regional Sports Networks. So even though — while sports costs are going up in Latin America like lots of other places, in general, it’s not hitting us, I think, with the same degree that it is in the U.S”

“in terms of the Pac-12, look, we’ve continued to have dialogues with them. But frankly, as long as they want to insist that you put more in the bundle that’s already too big and tax all of the customers at a rate that we don’t believe is fair for the customers that don’t care about it, and are unwilling to entertain any discussion of letting the customers choose, we probably won’t be able to carry it. So I would say, those are just the tough decisions you have to make when you look at a bundle that’s gotten too big, frankly, I think, in the eyes of most of our customers.”

“And I first of all believe that the times are different for the industry as a whole in that, frankly, the balance between content providers and distributors is out of whack. And therefore, further industry consolidation does make sense to help address what I think are unsustainable cost increases for the average customer”

“I mean, I’ve seen more customer complaints this year about the price increases that we took than other years. So there’s no doubt that customers are noticing and aren’t happy about it.”

“But it’s pretty clear to me, this is not sustainable for any length of time beyond the next couple of years. I mean, something’s going to have to give.”

“In terms of the U.S. fixed broadband to the home, we’ve studied that extensively. And I’m not going to get into a lot of comments on the call here. Some of what we — our research is proprietary. But we experimented with what we call a cantenna with one of the telcos 2.5 years ago, and so we have a pretty good knowledge base of what it would take to do fixed broadband to the home. And I think it’s not — it’s not an idea that we don’t think about. But it isn’t just about spectrum. There’d be a substantial buildout cost, and you’d then have to ask whether the price/performance, from a customer standpoint, in a world where speeds are rapidly moving from 5 to 10 to 25 to 50 megabits a second to even higher, can you build out — if you’re going to go spend billions and billions of dollars building out a fixed broadband to the home, you’d have to have a lot more conviction about what the product is going to look like and what speeds you think you can achieve and what parts of the country you’d do it in than I have today. Frankly, I have no idea what DISH’s plans are in that regard. I guess we’ll all see at some point.”

“I think even in terms of usage, you hear more hype about watching video on mobile devices. But actually, most of it is either WiFi or streamed in the home versus out of the home so far.”

“we just completed a study on streaming…and sure enough, they came back and it was over 70% that do streaming in some sort.”

“Clearly, there’s no question that there are spectrum limitations. Even if you wanted to do television in the home, over the Internet, you did 3 TVs, you’re going to have a problem. Okay? I mean, if they’re all HD, I mean, you’re just going to have a problem with the Internet, and you’re going to have a huge increase in your broadband charges from your broadband provider. So frankly, every time I look at this subject, there are all kinds of tradeoffs, and when you net it all out, I mean, I could — in theory, I could put DIRECTV over the Internet. We don’t have the rights to do that, but in theory. And you’d end up having to double your broadband charges roughly, I suspect. And by the time you got done, you’d be at the same price points, and it wouldn’t matter. You’d kind of be six of one, half-dozen of the other because the satellite is still a pretty efficient way to deliver signal.”