TWC’s SportsNet LA Carriage Fee ‘Beyond Rational,’ DirecTV CEO Says
The carriage fees Time Warner Cable is seeking for the SportsNet LA channel in Southern California are “far beyond a rational view” of the market, DirecTV CEO Michael White said Tuesday on an earnings call.
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The two companies have been at odds since Time Warner Cable paid $8.35 billion for the rights to carry Los Angeles Dodgers games on SportsNet LA, and White maintained it wasn’t “appropriate to put that on our pay-TV customers.” DirecTV’s not carrying SportsNet LA hasn’t had a material impact on its churn in the L.A. market, White said. He said DirecTV is having discussions with Time Warner Cable about carrying the channel, but the cable operator is seeking to double what most regional sports networks charge the satellite operator’s customers. DirecTV subscribers are 25 percent of Southern California pay-TV customers, analysts have said.
"We would have to step up and pay more for the Dodgers this year and we would love to find a way to carry them,” White said. “But this ‘pay whatever price and then dump it on every pay-TV provider in a market to pay for the decisions that were made by Time Warner management’ isn’t right. It seems to be the only industry I know of where the more competition there is, the higher the prices, and it’s a tax on most customers who wouldn’t pay it if they had a choice."
Time Warner Cable executives have said SportsNet LA is priced fairly and in line with what other regional sports networks charge, including those operated by DirecTV. Time Warner Cable is hopeful pay-TV “providers will come on board soon” with SportsNet LA, and the cable operator continues to work “tirelessly” to reach agreements, a TWC spokeswoman said. But DirecTV has “shown no sense of urgency in getting a deal done,” she said. “SportsNet LA is available on fair terms consistent with its value. If DirecTV wants to change the way regional sports networks are offered, they should start with the channels they own.” DirecTV officials have maintained that given the high cost being sought for SportsNet LA, pay-TV providers should be able to offer it on an a la carte basis.
Meanwhile, White declined to comment on reports of merger and acquisition plans. The Wall Street Journal reported last week (CD May 2 p2) that AT&T was weighing a bid to buy DirecTV for $40 billion and rumors of a potential merger between the satellite service operator and rival Dish Network also surfaced recently. AT&T has long resold DirecTV services
DirecTV’s Genie combo satellite receiver/DVR continues to spur business for the satellite operator, accounting for 66 percent of its Q1 gross subscriber additions, DirecTV Chief Financial Officer Patrick Doyle said. The growth in the Genie business follows a year in which DirecTV spent $300 million as part of an effort to upgrade its best customers, Doyle said.
DirecTV Q1 operating profit improved to $1.5 billion from $1.4 billion a year earlier as revenue rose to $7.85 billion from $7.58 billion. DirecTV’s Q1 average revenue per user (ARPU) improved to $100.16 from $96.05 a year ago, DirecTV said. DirecTV U.S. had a $1.24 billion Q1 operating profit, up from $1.11 billion in 2013 as sales grew to $6 billion from $5.79 billion, the company said. DirecTV U.S. added 12,000 net subscribers in Q1, down from 21,000 a year ago, to end Q1 with 20.26 million subscribers, the company said. DirecTV’s U.S. monthly churn was flat with last year at 1.45 percent. Average subscriber acquisition costs jumped to $648 from $629, the company said.