DirecTV CEO: We’ll Have to Raise TV Prices Again in 2014

Satcaster cites programming costs rising in high single digits for expected rate hikes

Get ready to spend more for DirecTV service: The biggest satcaster in the U.S. will be forced to hike prices again next year as programming costs continue to climb, according to president and CEO Michael White.

White, speaking at Goldman Sachs’ Communacopia conference Wednesday in New York, said DirecTV will “be careful” about how high the increases will be for TV packages.

DirecTV raised pricing this past February, which increased customer bills an average of 4.5%. White said 2014 rate hikes will not be as much but “while it might be not as much, it is still going to be meaningful.”

SEE ALSO: Cord-Cutting to Blame? DirecTV Loses 84,000 Subscribers

White blamed the ongoing rise in TV programming costs, which DirecTV projects will increase in the “high single digits” this year. Retransmission-consent costs are a particular pain point, he said: DirecTV’s payments to TV broadcasters have increased 50% this year and 600% since 2010.

“I would say clearly I’ve seen an impact from consumers on churn in terms of their feelings about the bill,” he said.

In the most recent quarter, DirecTV’s total monthly churn was 1.53%, unchanged from the second quarter of 2012. But the company lost a net 84,000 subscribers in the quarter ended June 30, only the second time in DirecTV’s history that its subscriber base shrank.

DirecTV is “two-thirds of the way across the river in terms of a reset on content costs” with big media companies, but several deals have yet to be worked out this year.

Sports continues to be another major driver of overall TV cost increases. White commented on DirecTV’s standoff with Pac-12 Networks, saying the collegiate conference would not allow the satcaster to carry channels only in certain markets.

“I can’t tax all my customers for something that 98% or 99% of them are not going to watch. There’s a point at which you have to stand up for the 99% who are already angry about their bills,” he said about the Pac-12.

“What I can’t live with is content costs that go up 50% forever,” White continued. “Median consumer income is not growing, folks. That’s what the challenge comes back to.”

As for DirecTV’s $4 billion deal with the NFL for the Sunday Ticket package, White said he is hopeful the satcaster can renew the pact when it comes due next year.

“It’s one of the few exclusive properties left in the media space,” he said. I’m still optimistic we will still be able to do that. But it’s too soon to speculate.” Sunday Ticket is a loss leader, he said, that has helped DirecTV increase gross subscriber adds in the third quarter.

The NFL has said it is approaching other parties about the Sunday Ticket rights; those include Google, which reportedly met with league officials about a possible distribution deal.

SEE ALSO: Cord-Cutting No Longer an ‘Urban Myth’: Pay TV Operators Drop 316,000 Subs in Past Year

Meanwhile, after DirecTV’s failed bid for Hulu, the satcaster is looking at some “targeted ideas” for launching an over-the-top video service, White said, reiterating comments he made last month. It won’t be a broad subscription VOD service like Netflix or Hulu Plus, however.

Commenting on a potential merger of DirecTV and Dish, White said U.S. regulators would be likely to reject such a tie-up. A consolidation of the two satcasters would provide billions in cost savings, and would give a combined company much more leverage in negotiating programming deals.

“There’s no question for all businesses in every industry that it is a much more challenging regulatory environment than it would have been five or 10 years ago,” he said.

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  1. Holden Caulfield says:

    Tears for DirecTV and their pitiful CEO just trying to make ends meet. This is one of Warren Buffet’s top ten security holdings and no wonder DirecTV’s stock price has risen from $20 to $60 since 2009. This is a company with a market capitalization of 32 billion dollars. I am pretty sure whatever increases the networks are asking for are more than covered by DirecTV’s already inflated prices. If this dumb MF really wants to save his customers money by not letting them sign on to buy the Pac-12 network, then do all your customers a really big favor and let them choose which channels they want to pay for. My guess is you would see a lot of people jettisoning a lot of your crappy channels.

    Why not do what do what you say yourself is best for the customer? Because it doesn’t happen that way and that business model is not what made this jackhole uber rich. I hope DirecTV loses another 85,000 customers next quarter and the quarter after that and I can watch their stock drop like this guy’s libido. It’s been funny watching DirecTV push their product promotions over the past year because they are desperate to make up for lost subscribers….Mr. Talking-Head please don’t disappoint Mr. Buffet and his high expectations of shareholder value.

    I have Time Warner cable (one of over 40 carriers that have the Pac-12 networks), but it is a pity that Pac-12 fans are held hostage by companies like this.

  2. Can’t believe this corporat fat cat. What B.S hes throwing at us. I’ve already told them if they give up rights to NFL i will say. bye-bye and go to service where i get the PAC12. Only 2% will watch is a total lie. Sports leader a real joke. I have e-mailed them and called them and all I get is the generic answer. They have also stopped answering my e-mails. We pay for 98% of the channels we don’t even watch. I.. want ALL of the Pac 12 channels. This stand-off sounds like the Dish Network not carrying YES network

  3. Steve Blackman says:

    Until Directtv gets the pac12 network, I will not come back. When they do, I will and I know many people who would do the same.

  4. Mrc says:

    The CEO is a douche, totally out of touch with his base customer in PacNW. I have already cancelled my agreement with them and I urge every Pac12 fan to do the same!

  5. bshroy says:

    I am one of those long term current customers willing to pay for the PAC-12 Network. If you can provide a channel for dogs at least give me what I have been asking for. Pathetic!!!

  6. LightningB says:

    Current DTV subscriber here but only because of the deal I am currently getting (DTV screwed something up and applied discount twice) but when it is up in November I am switching. I’ve lobbied them about not getting the PAC 12. How can the Pac 12 work deals with Time Warner, Comcast, Dish etc. but all of a sudden it’s unfair what they offer DTV? And Mr. White’s excuse is irritating. Because a majority of subscribers won’t watch it, they don’t need to pick up the channel? There’s dozens of channels I have no interest in watching (along with a majority of subscribers) yet I am paying for them. Why am I paying for others to watch Oprah’s network? Or cartoon channel? Or MTV? Or Bravo? If you pass on cost to me for those channels even though I do not watch any of them, then others can pay for me to watch the Pac 12. Pick the dang channel up White!

  7. calfanz says:

    Hello. I am one of the 2%. I left DTV because of the pac12 networks. I dont watch 95% of the channels you have. but i still have to pay for them. you decide to change the deal right when the pac12 comes onboard? do you realize it is now considered the top or 2nd from the best Football conference? the big ten network? you carry that — SEC—you got that ACC—check so what the HECK? You promise and promise and you aren’t the sports leader. You are the sports loser.

    At this rate, I look for the NFL to go another route—probably to AppleTV or Google/YouTube.

  8. Tommy B says:

    I’m a DirectTV subscriber. I understand Mr. White’s feeling that he needs to raise customer prices b/c the networks are raising their prices for content. I get that. But Mr. White, is the hit so substantial that you would raise prices at the risk of punishing and alienating your customers. Consider, instead, not giving yourself a raise or absorbing some of the cost from your big fat paychecks and benefits. Don’t become a corporate fatty– Americans are tired of people like that.

    • Bugfan1 says:

      I completely agree with you Tommy. Mr. White could be the ONE that finally stands up & says; “No. I will NOT raise the prices on my customers this year.” I know he won’t do this; but he could SAVE many of his customers & probably gain many also.

      Well; if Mr. White raises prices again this year we will be leaving them after our contract is up. I had some friends that are moving into their new house and they were going to DTV. But when they find out about the price hikes they will go with someone else. DTV is the best; but we just can’t afford to pay any more.

    • Tman says:

      DTV subscriber here too, that is disillusioned with DTV when it comes to P12 network. They can carry the B10 network and recently saw an article where they are probably going to add the Longhorn Network. Really? If that does happen I will definitely be switching providers. I’ve been going to a friends house for P12 games and I am still hopeful that agreement is worked out, seeing as most other major providers have it available. Stop dilly dallying with Hulu or OTT service and focus on providing more HD channels and best service, your core business.

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