[justlgi]

The strategy to build a premium brand was adopted by DirecTV Chief Executive Chase Carey in conjunction with Chief Marketing Officer Paul Guyardo early in 2006. They decided to raise credit requirements for people signing up to the service and to focus on the best-paying customers.

"The competition tries to sell television as a commodity therefore the only thing they have to talk about is price," Guyardo told Reuters in an interview. "We have put our stake in the ground as a premium service," he added.

http://www.reuters.com/article/marketsNews/idUSN2228127220080724?pageNumber=1&virtualBrandChannel=0&sp=true

 

[MIAMI1683]

http://www.reuters.com/article/marketsNews/idUSN2228127220080724?pageNumber=1&virtualBrandChannel=0&sp=true

You know the funny thing is. It is all about perception. I still use them cause they have the best equipment, and service. I know I pay more. Thanks for reminding me .

 

[Mertzen]

Not so sure. With the latest [ and much more expensive ] NFL ST / Premier offer for new customers our local sales have dropped. I think the majority of customers still want it cheap

 

[bonscott87]

Nothing new here, they have been talking about it during the last few quarterly investor calls. And last quarter they signed up more new subs then anyone else. Dish, who goes after anyone with a pulse, nearly *lost* subs in the quarter. By going after the "premium" customers they are actually insulated from the weak economy because those customers are more able to withstand it and stay.

Besides, to this day DirecTV is still cheaper then my cable option and has a ton more channels.

 

[gregjones]

Not so sure. With the latest [ and much more expensive ] NFL ST / Premier offer for new customers our local sales have dropped. I think the majority of customers still want it cheap

This is more about DirecTV's choice customers versus customer choice. The vast majority of customers will prefer cheap when quality is the same. Some will prefer cheap when quality suffers. The point is that DirecTV is pushing themselves as a better value because of quality instead of a better value because of price.

They are trying to get the greatest return per customer, which means lowering overhead per customer. This means they want customers that will not cancel, will not pay late and with a high spend per account. You gain margin by raising prices and/or lowering costs. They seem to have taken the stand at lowering costs by having customers less likely to cost them money. Overall, not a bad play.

 

[DarinC]

Besides, to this day DirecTV is still cheaper then my cable option and has a ton more channels.

That's true for me too (but not by nearly as much as it used to be). But as far as satellite goes, they seem to be the more expensive option. A few months ago my parents lost their TV provider... they had something through their phone company, and that option "went away". What they had was a pretty good service for a very good price, and they didn't want/need more than that. So despite the fact that both myself and my sister's family are on DirecTV, I suggested they get Dish. It seems a little better suited for someone with limited needs.

 

[CompiledMonkey]

It's definitely more expensive here but it's well worth it for the HD content, sports offering, and overall enjoyment of the service. I have more faith in D* to provide better content and quality. Their business is TV and only TV. It's not like Comcast or Verizon who spreads thin over a host of various services.

 

[skyviewmark1]

My Dish Network Sales have increased heftily since the NFL Sunday Ticket Promotion Started.. My DirecTV sales are in the cellar.. While this may be popular for a few people, most people just don't want it. They want cheap programming and more discounts. Come on DirecTV.. Throw us a bone and give us something else to sell..

 

[scrybigtv]

As I've stated previously, I switched to D* because my previous provider lost the MLB EI package. I've been pleased with the D* experience so far, but it is somewhat disconcerting that D* is apparently focusing its attention on the so-called high-end users. It makes me a little uncomfortable, since I consider myself an average member of the middle class. While I enjoy the better things in life – and D* certainly does, in many aspects, provide a better service than most of its competitors – I'm in no way insulated from the skyrocketing costs of fuel, groceries, and other goods and services that threaten to make the American Dream unattainable to many hard-working Americans.

I have always been able to provide a comfortable existence for my family. But I certainly don't consider myself among the upper crust of society, and I would hope that doesn't make me expendable to my satellite provider.

 

[gregjones]

This makes me wonder what percentage of DirecTV subscriptions are initiated by a phone call or website visit to DirecTV vs other retailers. I wonder if there is a migration of users from one method to the other.

 

[Stuart Sweet]

Even in a down economy, there are still people who want better service at a higher price. The mistake would be trying to compete at the bottom of the market where there's no money to be made and basic cable (locals only) has the advantage.

 

[BattleZone]

So despite the fact that both myself and my sister's family are on DirecTV, I suggested they get Dish. It seems a little better suited for someone with limited needs.

Dish's model, where there are no up-front lease fees, but you are limited to 1 (2-room) DVR and only 4 TVs, is definitely geared to the people who are looking for the lowest price over all other considerations. Very, very few Dish customers move beyond 4 TVs because the costs of doing so is so high, and they almost always refuse to pay.

The bottom line is that Dish overall tends to attract the less financially secure customers, and those customers are quick to leave Dish for something else that's a couple of bucks cheaper, even if the service gives them less (Uverse, for example).

DirecTV's plan is much better for the long-term. By purposely casting themselves as a premium provider, and raising credit rating limits (to waive the $200 activation fee), they largely eliminate the class of customer that is responsible for most of their problems and most of their churn rate, while attracting more of the higher-end, bigger-spending customers who are better insulated from economic downturns. And they create a desire for their brand, because premium brands tend to be desired even by those who can't afford them, and people who can afford them will pay the price without much complaining.

As long as DirecTV continues to use a good chunk of their revenue to improve quality and capacity, they've got a winning plan.

Now if they could just get the installation division in order...

 

[Azalo]

I know I am not a preffered customer, I subscribe to the cheapest package and I would switch to Dish or Comcast in a minute when my contract is up if the price is right. I initially switched to D* in 06 because I recently had bought an HDTV and D* was promising over a 100 HD channels soon, well those channels never came until after over a year with them and by then I realized that the HD I enjoy the most is the OTA variety (sports, Lost, etc). I've never noticed any difference in pq between Dish, D* and Cox-HD in Virginia.

 

[Ken S]

There are generally higher margins at the top end of a market and I'm sure that's the DirecTV goal. The problem starts to occur when you're a reseller and you are selling the same item as the other guys at a higher price. As DirecTV's competitors all start to rollout more complete HD package the product becomes a commodity and price will be the differentiator.

Couple that with the telcos and cable companies being able to bundle phone/internet service and DirecTV is going to face a real challenge.

Don't get me wrong...they picked the right time to capitalize on their advantage, but as that advantage fades they have to hope the other guys bring their prices up to match (likely in this industry). Even then the "stigma" of being the high-priced brand can hurt.

The biggest thing for DirecTV rolling into 2010 will be Sunday Ticket...and don't expect that the NFL won't know that. I would expect the next round of negotiations to be a bloodbath...and one where the cost of winning may actually result in a loss. It'll be fun to watch.

 

[Herdfan]

Even in a down economy, there are still people who want better service at a higher price.

Plus even in a down economy, people still want/need entertainment and satellite can provide a very good ROI. For $60 you can get a month of programming vs a night at the movies.

 

[BlueSnake]

It's no secret that in a down economy people spend more for home entertainment because they are spending less on travel. With the price of gas people are staying at home more and spending more on home entertainment.

There have been numerous articles about this online. Gamestop is doing extremely well during this downturn in the economy.

I am sure DirecTV is very aware of these financial dynamics currently at work in the market.

 

[Azalo]

It's no secret that in a down economy people spend more for home entertainment because they are spending less on travel. With the price of gas people are staying at home more and spending more on home entertainment.

There have been numerous articles about this online. Gamestop is doing extremely well during this downturn in the economy.

I am sure DirecTV is very aware of these financial dynamics currently at work in the market.

Thats true but I suspect that many people look into where there money is going more closely. I found that I could do w/o ESPN, switch to the family package and sign up for Blockbuster online. For the same 20 that ESPN is essentially costing me I can get 10-15 movies a month maybe more if I really wanted to.

 

[DarinC]

The bottom line is that Dish overall tends to attract the less financially secure customers...

I'm sure there's a significant chunk of the market that simply isn't "in" to television enough to warrant paying a lot for it, regardless of their financial security. Honestly, I don't even know why I have all this. If my TV service went away tomorrow, it really wouldn't affect me (internet is another story, however). In fact, I lived with a bad multiswitch that only gave me half the transponders for about 6 months, and one of my TiVos had a dead hard drive for even longer. I simply never turned the stuff on often enough for it to be a high priority to get fixed. In fact, it would probably still be like that if someone hadn't moved in with me that enjoys TV more than I do.

 

[Brian Hanasky]

Even in a down economy, there are still people who want better service at a higher price. The mistake would be trying to compete at the bottom of the market where there's no money to be made and basic cable (locals only) has the advantage.

My opinion re: paying 100+ per month for Directv in a bad economy is that if I can't drive as much, can't go out to eat that much, can't buy as much stuff, and can't go to as many events as I used to at least I can't have all the TV I wan't at home.

To some people that may be a twisted way to look at it but it fits in my head. :grin:

 

[bertman64]

With Blockbuster online I get 3 mailed to me with unlimited in-store exchanges for 34.99 plus tax per month. By trading twice a week you could average 48 movies in a month but at least enough to get it down to 1.00 each if you don't mind driving and trading them so much! They are usually 6 months ahead of movie channels so I cut off my movie channels which were costing me 50.00 per month but I miss boxing and other stuff on HBO and Showtime so not sure how long I'll keep them off.