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News Analysis
Why Did DIRECTV Start Adding HD Again?
By Swanni

Washington, D.C. (February 4, 2013) - In 2007, DIRECTV became the HD channel leader, increasing its overall total to nearly 100 channels. Over the next year or so, the satcaster would add a new HD channel every month or so. Sometimes, it would add a handful of new HD channels. Or even more.

But then in 2009, it stopped. From 2009 to 2011, the company added just a few high-def channels.And then to add insult to injury, DIRECTV executives started to make noise that its subscribers already had
enough national HD channels.

For DIRECTV, the HD “bigger is better” battle is over. “To be honest, I think right now, everyone’s got most of the important stuff in HD,” Derek Chang, DIRECTV executive vice president of content strategy and development, told Multichannel News in July 2011. “Once we got to 100 channels, it became about delivering the overall experience.”

The company even tried to fool their subscribers by
running a bogus campaign suggesting it had the capacity to offer 200 HD channels, although it obviously never planned to actually offer 200. Looking at the sluggish economy, DIRECTV clearly concluded that it no longer had the resources to devote to HD expansion efforts. And it was particularly adverse to adding basic cable channels in HD because that required paying more to acquire the rights

For DIRECTV HD fans, it didn't look good. But then in September 2011, there was a glimmer of hope when DIRECTV added AMC in high-def after subscribers waged an informal campaign to get the popular channel in HD. Then in early 2012, it added TruTV in high-def and later in the year it added
Turner Classic Movies, E!, National Geographic Wild, BBC America, ION, DIY and Disney Kids in HD.

And last month, it added eight more HD channels, including IFC and CNN Headline News. That means DIRECTV has added roughly 20 new national HD channels in the last 10 months or so.

Suddenly, DIRECTV is the HD leader again and the company is
making bold statements about going all-HD by 2016.

What changed?

It's easy to suggest that DIRECTV believes the economy is improving and therefore is more willing to invest in acquiring the rights to carry channels in high-def. And that certainly is a factor.

But there's more going on here. For years, DIRECTV increased its net subscribers every quarter; in fact, it added a lot of new subscribers every quarter. But in
August 2011 it reported that it gained just 26,000 subscribers in the 2011 second quarter, the satcaster's lower quarterly gain in history and significantly below the Wall Street consensus projection of 57,000.

DIRECTV then reported it added 125,000 subscribers in the 2011 fourth quarter, which was considerably less than its 2010 fourth quarter result when it added 289,000 subs. DIRECTV said its subscriber churn -- the industry term used for subscribers who drop the service -- was slightly higher in the 2011 fourth quarter (1.52 percent) compared to 2010 (1.44 percent.) For the year, the satcaster's churn was 1.56 percent, compared to 1.53 for 2010.

The company was losing its magic touch and the decision to ignore arguably its most valuable subscriber base -- the HD audience who historically pays more in monthly fees than any other group -- was having an effect. (This was not unseen by all; see
my prediction.)

Making matters worse, Dish, DIRECTV's top rival, had become more aggressive in adding HD channels and even cable operators, such as Comcast, were expanding its HD channel counts in numerous markets.

So in my view, DIRECTV finally decided that being 'penny smart and pound foolish' had gone on long enough. The company decided to get back in the HD game again and the result has been a mini-explosion of new high-def channels over the last 12 months.

And it's a good bet that more HD channels will be launched later this year, sooner than later, in fact. DIRECTV has changed course and the HD audience is the better for it.

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