‘Ball in TiVo’s Court’ to Deliver Broadband Combo, DirecTV Says

When it comes to shipping a new broadband-enabled HD DVR/DirecTV satellite receiver, “the ball is in TiVo’s court” on when the product becomes available, Martin Sheehan, DirecTV senior director of investor relations, told us. While TiVo originally expected to ship the combo device in 2009, there were many technical issues that need to be resolved in porting TiVo’s DVR platform to a DirecTV HD satellite receiver, he said. TiVo is “continuing to test” the HD DVR/satellite receiver and will have it available by year end (CED Sept 15 p1).

With all of the existing TiVo DVR/DirecTV satellite receivers being SD set-top boxes, “it is very important” for TiVo to shift to an HD product, Sheehan said. DirecTV was one of TiVo’s early partners before parting ways with the company in 2005 as it shifted some focus to then-affiliate NDS’ DVR platform. DirecTV and TiVo signed a new agreement in 2008. The number of DirecTV DVR customers is expected to increase to 10 million by mid-2011 from about 6 million this year, Sheehan said. The increased number of DVRs will boost DirecTV’s ad revenue as the satellite company enters the spot advertising market in 2011. DirecTV’s targeted ad system will be combined with existing local market cable ad platforms to increase coverage in 25 markets. DirecTV signed a deal with NCC Media in June to broker its local ad inventory. DirecTV’s ad-related revenue is up 10-15 percent so far this year, Sheehan said.

In developing the new combo product, TiVo had to “take an HD DVR and put a TiVo interface on top of it and that wasn’t easy” as it had to port about 2 million lines of code, Sheehan said. DirecTV will position the new HD DVR/satellite receiver as a premium product, Sheehan said. DirecTV typically charges a $7 monthly fee for a DVR service, he said. The new device is expected to boost TiVo’s per subscriber revenue from DirecTV customer from the less than $1 it got for the SD product, TiVo officials have said.

Meanwhile, DirecTV subscriber response to its 3D channels is “too small to measure,” Sheehan told us. Much will depend on how quickly consumers buy 3D TVs, but the uptake isn’t likely to be as great as it was for HD channels, Sheehan said. While DirecTV is carrying ESPN 3D, it also has launched n3D with Panasonic and has pay-per-view and Direct Cinema video-on-demand channels. The offerings aren’t “a must have, but rather a like to have,” Sheehan said. DirecTV is delivering about 12 hours of original content daily on n3D, company officials have said. But by late 2011, with movies increasingly being filmed in 3D, there might be enough content to support two 24-hour 3D channels, Sheehan said. DirecTV isn’t likely to charge for 3D channels, since it will be some time before demand for the technology builds, he said.

DirecTV also expected to post profit this year in the “tens of millions” of dollars on its NFL Sunday Ticket package, Sheehan said. DirecTV began a new 5-year, $4 billion contract in 2009 with the NFL, Sheehan said. DirecTV had been working under a four-year, $3.5 billion deal with the league, he said. DirecTV has about two million NFL Sunday Ticket subscribers. DirecTV is spending about $100 million this year on TV ads promoting NFL Sunday Ticket.

DirecTV also is experiencing swift acceptance of its multi-room service that carries an additional $3 monthly fee, Sheehan said. About 25 percent of DirecTV’s gross subscriber additions in August opted for the Multimedia over Coax Alliance (MoCA) 1.1-based service, Sheehan said. While a MoCA-equipped HD satellite receiver increases DirecTV’s up-front expenses, installation costs remain flat, he said. There also is a savings in that there “there are fewer problems” and subscribers “don’t have to upgrade” hardware, he said. DirecTV introduced the MoCA offering in June.

About 50 percent of DirecTV subscribers are gained through direct sales, while 25 percent come from retail and 15 percent arrive through re-sale agreements with AT&T, Verizon and other telcos, Sheehan said. Another 5-10 percent are from multiple-dwelling unit deals, he said. Among DirecTV’s top retailers is Best Buy, which gets a commission as well as a 1-2 percent “continuing use” fee if subscribers remain a DirecTV customer for up to five years, Sheehan said.