Over-The-Top Video Only Modest Threat to DirecTV, Says CFO

Over-the-top video represents only a modest threat to pay-TV subscription rates, DirecTV Chief Financial Officer Pat Doyle said Tuesday at a UBS investors conference. Only a marginal group of “outliers” will give up subscription to watch programming online, he said. The company will “certainly monitor” developments in over-the-top content but doesn’t consider it an immediate threat, he said. Still, DirecTV foresees a TV market that relies on both conventional delivery and Internet connections, he said.

The company is ramping up efforts to connect its set-top boxes to the Internet, Doyle said. Subscribers to DirecTV’s higher-level packages no longer pay a fee to connect their set-top boxes, he said. Although the connections cost $65-$70 a subscriber for the labor and hardware, the change makes for a “stickier customer” long term, said Doyle. “Our view is when you've got a TV product in front, different generations and segments” will want to use the TV differently, including interacting over Facebook and Twitter, he said. The FCC’s net neutrality effort isn’t expected to affect DirecTV’s business or customers substantially, Doyle said. A move to Internet usage-based pricing by broadband providers would largely be understood by consumers, he said.

DirecTV’s sales and marketing teams are considering how to handle its NFL Sunday Ticket product for next season, a football season which could be canceled over labor disputes. The approach hasn’t been decided, but they want to avoid needing to make refunds, Doyle said. The DBS company’s contract with the NFL is structured so that even if the next season is canceled, DirecTV will make a payment to the league, but it will be used as a credit for later seasons, and a season will be added to the contract, he said. The next season will likely see a ramp-up of NFL Sunday over the Internet, he said. The offering has been “fairly limited,” but it is “certainly” worthwhile to capture incremental revenue “even if it’s not going to be a killer,” Doyle said.

Over-the-top video isn’t a major competitive concern in the U.K. for BSkyB either, Andrew Griffith, the company’s chief financial officer, said at the conference. The U.K. market is far different from the U.S., because cable and satellite only reach about 50 percent of the homes there, leaving a lot of “head room” to go after. BSkyB’s position as a content provider allows for growth across any medium, he said. Product availability over the Internet hasn’t been a problem, he said. That debate takes place “in rooms like this, not with customers,” he said. Once that changes, the company will likely expand its products for sale online, he said.

It’s far to early to tell how 3D will play out in the industry, Griffith said. BSkyB is well positioned to take advantage of the technology if it does take off, he said. The company began including 3D capability several years ago, and, with TV manufacturers increasing production of 3D sets, the market will quickly become clearer, he said. Griffith declined to discuss News Corp.’s proposed acquisition of BSkyB.