DirecTV 4Q13 Earnings Call Notes

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A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Investing in new technologies, getting ahead of the curve

“Additionally, our team has collaborated on a robust product roadmap that embraces new technologies, like the cloud and mobility, to advance the entertainment experience across multiple platforms and drive deeper customer engagement while also continuing to leverage our traditional strengths with satellite.

For example, in 2014, we plan to expand our DIRECTV Everywhere content offerings, enable our subscribers to restart a show from the beginning if they tuned in late and allow subscribers to catch up on shows they missed the day after they air. And we’re also continuing to enhance our world-class user interface across all devices, with a particular emphasis on greater personalization, deeper social integration and even better search and discovery.”

At a minimum, we’ll maintain market share in the US

“With successful execution in these areas, I’m looking for the DIRECTV U.S. business to, at a minimum, maintain its market share.”

We’re still not exactly sure what we think about the cable consolidation. Broadband monopoly in 2/3 of the country is an important consideration for regulators

“I think it’s very early in the process, and we’re still assessing some of the competitive implications. But certainly, if the deal is approved as proposed, it clearly represents an unprecedented media concentration in 1 company. I guess, I think the challenge in terms of what posture we take in Washington, D.C. we haven’t decided yet. But I think one of the challenges is to try and ensure that it is appropriately scrutinized in some kind of unique ways than you might traditionally look at. And I think it’s particularly around the effective [ph] broadband monopoly they might have in as much as 2/3 of the country and the implications of that, as well as I would argue the nexus or the interaction between the horizontal power and the vertical power that they would have with content costs.”

Keep your customers

“as the market gets competitive, it’s really important that we hang on to our customers…I’m probably a little more sober about the challenges of raising prices and the impact that, that has on the total churn metric in any given year.”

Content costs should come down if more people are finding content online

“I continue to believe if your viewership goes down materially or customers are finding other ways to access their content, like online, that, that should be reflected in the price that one pays for a service”

Embracing a satellite/cloud infrastructure

“I’m not talking about taking the DIRECTV 200-channel service and trying to do that over the Internet. I continue to believe that our highway in the sky with 12 satellites, on a marginal basis, is a low-cost highway to provide a high — the highest quality signal out there. But with that said, we are embracing a hybrid satellite cloud infrastructure for our core business, which will give us greater variety and greater ability to move content through the cloud seamlessly for consumers’ own devices in the home.”

Putting together some niche offerings surrounding over the top. Testing new things

“What we are thinking about is a couple of, I’d call, more niche offerings, which, for competitive reasons, I really would rather not get into right on this particular call. But I’d say stay tuned. I think you’ll hear more from us this year. But again, our focus in that area is more — probably, this year’s probably more niche related and let’s get some learning.”

Think about customer service holistically

“On the customer service side, Frank, look, we think of it much more broadly than just purely service although service is an element. We think of the whole customer experience. We’ve got a simplified bill that we’re planning to launch later this year that we think will be more transparent and easier for customers to understand. We’ve added chat capability and self-care. We’ve got further enhancements in our self-care capability, we’ve benchmarked Zappos and Amazon, and I think that’s an area that we can do better with our customers. We continue to strive to even be better in terms of on-time performance, on-time arrival in the way we service our customers.”

Not clear what TWC/Comcast merger will do for content costs among competitors

“consolidation in the industry is the only way I know, from a marketplace standpoint, to put some further break on growth rates above and beyond normal inflation. So on the one hand, I could certainly say if you’re negotiating with 30 million subscribers, you probably have more leverage. On the other hand, it’s a very complicated dynamic because that leverage might not flow through to the rest of the competitors. And second, they happen to own a substantial amount of program — of content themselves and kind of so what their motivations would be between content price increases and the cable side, we’d still — we’d have to see.”

Not seeing any impact from Google fiber where it is, but it’s still small. In general the more competition in broadband the better

“As it relates to Google Fiber, at least what I’ve read about it, I mean it hasn’t been a material impact on us one way or the other. Although we’re happy to see naked broadband opportunities for our customers, we think it’s good for our company. And where we can figure out a way to do bundles, we will. But it’s only got like 2,000 customers, I guess, I saw on one report in Kansas City. So it’s not material enough to see anything anyway.”

“frankly, from our perspective, the more competition in the broadband space, the better. We’re happy with that.”

We’re launching a 4K satellite, but not sold that 4k is going to be big

“In terms of 4K, we’re launching a satellite, I think, late this year or this fall for the U.S. business. That’s a key enabler for us to get our 4K business going. I’m not one who’s yet ready to say everything is going 4K, to be honest with you, but we will be prepared.”

“it’s not yet clear to me how fast the content companies are going to come along. They’ve got a huge investment in HD trucks that they’re not going to walk away from. ”

“I don’t yet get a sense in my discussions that there’s some wholesale move to throw out all their HD equipment and get ready to start investing in 4K equipment. I think they’re all kind of looking at it, going to try some things and test and learn and we’ll see how differentiated the consumer experience is and how fast 4K TV takes off.”