3 Reasons Why DIRECTV Will Lose Subs

(September 18, 2009) -- Despite the recession and growing competition, DIRECTV has been remarkably effective in continuing to add subscribers. In its last financial statement, the satcaster said its net subscribers rose 74 percent in the second quarter, with a monthly churn rate of just 1.5 percent.

At the end of the second quarter, DIRECTV reported that it had more than 18 million subscribers in total, a seven percent increase over last year's second quarter.

Well, DIRECTV, enjoy it while you can.

I predict that the nation's largest satcaster will start to experience a slowdown in subscriber growth -- and it will be largely due to its own mistakes.

(See more below.)

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Here are my three reasons why DIRECTV will start to lose subs to its rivals during the next several months:

1. The Versus Dispute
DIRECTV last month was forced to take the sports channel Versus off the air when the two sides could not reach a new programming agreement. While Versus is not a top-rated channel, its audience is loyal and enthusiastic thanks to a lineup of National League Hockey games, college football contests and IndyCar races. I believe that many DIRECTV subscribers are now either switching to other TV providers that carry Versus, or are seriously considering it. (Smartly, both Cox and Dish Network are offering free previews of Versus through the month of November.)

DIRECTV, which is seeking to reduce costs, particularly the fees it pays programmers to carry their channels, underestimated how the public would react to dropping Versus. And if the satcaster continues to play hardball with programmers like Versus, it will only further alienate its subscriber base.

2. The 24 Month Commitment
Like other TV providers, such as Verizon and Dish Network, DIRECTV often requires customers to sign a two-year commitment in return for the free use of a company HD DVR or some other benefit. If the customer decides to leave DIRECTV before the two years are up, the satcaster assesses a financial penalty which sometimes runs into the hundreds of dollars. (The penalty is legal because it's included in the two-year contract.)

In recent months, the two-year commitment has generated considerable negative publicity around the country, with dozens of local newspapers and TV stations running stories suggesting that their readers and viewers have been unfairly treated by DIRECTV when they decided to drop the satellite service early. While it's true that other TV providers use the same 24 month commitment, it seems that DIRECTV is the only one that the media focuses on when it reports on the practice.

This is leading to negative word-of-mouth about the satcaster and, ultimately, will discourage some consumers from signing up with DIRECTV.

3. The HDTV Drought
Over the last 18 months, DIRECTV has added just a handful of new high-def channels. While the satcaster was once the clear HD leader with more than 100 high-def channels, it has fallen behind rival satellite service Dish Network and Verizon in that category. In addition, several cable operators have significantly boosted their high-def lineups, often adding HD channels that can not be found in DIRECTV's lineup.

Unless DIRECTV starts adding new HD channels -- and soon -- many high-def enthusiasts will start switching to TV providers that will.

© TVPredictions.com

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Phillip Swann is president and publisher of TVPredictions.com. He has been quoted in dozens of publications and broadcast outlets, including CNN, Fox News, Inside Edition, The New York Times, The Washington Post, The Chicago Tribune, The Financial Times, The Associated Press and The Hollywood Reporter. He can be reached at swann@tvpredictions.com or at 703-505-3064.

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