DIRECTV Final Conference Call

I fully expect this deal to close

“let me just start by reiterating that I fully expect this will probably be our last earnings call as a separate public company.”

I’d like to thank you, our investors

“et me just take this opportunity to briefly thank all of you, our investors, for your support over the past five and a half years. Since I became CEO, our number-one focus has been driving shareholder value and serving our customers. And if I take a look at our stock price, I’d like to think we’ve made some good progress on the shareholder value creation front.”

The most valuable thing that AT&T is buying is our people

“I think it’s important to point out that the reason for our success, though, really goes back to our DIRECTV people. So let me just thank all of our DIRECTV employees for all their hard work, dedication, their creativity and imagination to make our business what it is today over the past five and a half years and even beyond that. Those are the folks who have truly made this a great company as well as, I think, a great place to work. And at the end of the day, I certainly believe that – and I think Randall does as well – that the most valuable assets AT&T is buying is truly our people.”

Most industry contracts have a lot of restrictions on them but we’ll see how Verizon works out

“Most industry contracts typically have a fair number of restrictions in them in terms of what you can do. Now, we’ll see with Verizon’s approach. I’m certainly happy to see someone drawing attention to the issue of giving consumers greater flexibility, but we’ll have to see how that works out.’

Reality is starting to set in for programmers re: a la carte

“”I think the programmers have become a little more flexible. I think reality may be settling in. And I think in the end, it’s awfully hard in today’s world to not provide consumers what they want with some flexibility. I’m not a believer that we ought to go all the way to a la carte, but I do think the system has kind of gone too far the other way at this point.

Sports still great. Over a million buys of the fight

“if you look at any of the highest rated programs, most of them are NFL games. I mean, there’s no doubt that sports, particularly live sports, continues to draw massive audience. I mean, we were thrilled with the results of the fight, pay per view; we had over a million buys at DIRECTV.’

The Dodgers was a reckless deal at many multiples of what was being paid before

“Look, I think in the case of the Dodgers, frankly at this stage it’s probably for AT&T to make a decision, but it was a reckless deal at many multiples of what was being paid before, well above what anybody else would have bid, and then they tried to force customers to pay for it.”

AT&T is going to try to take this product mobile

“I think certainly as a company that has a world-class mobile business, you can fully expect they’re going to mobilize everything. I think you can certainly expect that we are going to try and take TV Everywhere, all the way to the promise land, to deliver on the promise that we made several years ago that has been difficult for the industry, I think. I can see a future not too far out there where you’re going to see a lot more exciting stuff of – your ability to watch stuff on any device you want”

I’m not sure over the top is attractive if you’re not selling broadband

I think in the industry you’re seeing a lot of experiments of different ideas and everyone is well aware that consumers would like skinnier bundles. It’s not at all clear to me that it’s just an over-the-top product is going to be all that attractive financially a proposition if you’re not selling broadband, but who knows?”

DirecTV 4Q13 Earnings Call Notes

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.”

DIRECTV 2Q13 Earnings Call Notes

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.”