The goal: Create a premium brand that customers will be willing to pay more for each month.
However, one Wall Street analyst says that the strategy could backfire if the nation's economy continues to falter. Consumers may seek out TV providers that offer fewer services at smaller prices.
"There is the possibility that being a premium brand at the high end of the pay-TV market may end up being negative for DIRECTV," said Kaufman Bros analyst Todd Mitchell, according to Reuters.
Thus far, DIRECTV's strategy has paid off with the satcaster leading the industry with the highest revenue per subscriber ($80 a month). Comcast is second with $76 a month, according to Reuters. (Dish Network averages $68 a month.)
In addition, the satcaster added 275,000 net subscribers in the first quarter.
But analysts say they expect the second quarter net sub totals to fall significantly, perhaps as low as 100,000. If those reports are true, DIRECTV's huge investment in satellites and infrastructure that enables it to offer more high-def programming could be questioned.
The company's investment would also be in jeopardy if economy-minded consumers started to cut back on their monthly subscriptions, perhaps eliminating a few premium services.
Reuters notes that the company's decision to develop a 'premium brand' originated a few years ago when top executives decided to raise the credit requirements for signing up. Soon thereafter, DIRECTV's average monthly subscriber bill started to rise.
The company then began investing in satellites that would enable it to offer more high-def channels. Most analysts agree that the move has paid off thus far.
"DIRECTV has done a pretty good job in the HD propaganda war, convincing people that they have 100 channels and that's far superior," Tuna Amobi, an analyst at Standard & Poor's, told Reuters. "It's all about perception."
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