By Yinka Adegoke
NEW YORK (Reuters) - When comedy talk show host Jimmy
Kimmel acts as a pitch man for DirecTV this summer, he joins a
list of celebrities the U.S. satellite television provider has
engaged to promote itself as a premium brand.
A focus on high-definition programming has helped DirecTV
Group Inc <DTV.O> drive subscriber growth, but it could become
a liability as consumers tighten their purse strings in the
face of rising gas prices and the weak economy, analysts say.
"There is the possibility that being a premium brand at the
high end of the pay-TV market may end up being negative for
DirecTV," said Kaufman Bros analyst Todd Mitchell.
DirecTV's growth is expected to have slowed in the second
quarter, when it is forecast a gain of 100,000 to 150,000 net
customers, according to three analysts polled by Reuters. That
compares with 275,000 additions in the first quarter.
But growth is still seen better than that of rival DISH
Network Corp <DISH.O>, which positions itself as a low-cost
provider of satellite TV and has suffered operational missteps
compounded by the poor economy. The analysts expect DISH to
have added between 19,000 and 75,000 net subscribers.
DirecTV has been more successful than other U.S. pay-TV
operators in building a reputation for high-definition and
exclusive programming, including football's NFL Sunday Ticket,
which Kimmel will promote.
It has the highest average video revenue per user in the
U.S. pay-TV market, at around $80 a month. In second place is
cable company Comcast Corp <CMCSA.O> with $76, while DISH
generates $68.
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.
That decision initially led to a fall in subscriber growth,
which unnerved some investors.
Then customer cancellations -- known as churn -- began to
improve as DIRECTV attracted higher quality subscribers, who
paid their bills on time and were less likely to default. And
in the last two quarters, DirecTV has shown a stronger ability
to attract consumers than DISH.
Wall Street has taken note. DirecTV's shares have
outperformed other pay-TV providers, rising 16 percent so far
this year. DISH shares have fallen 17 percent, while Comcast's
stock has risen 8 percent, for example.
"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.
His marketing team has signed up celebrities like pop star
Beyonce and actress Pamela Anderson for memorable ads to
resonate with over 35-year-old family man customer base.
"DirecTV has done a pretty good job in the HD propaganda
war, convincing people that they have 100 channels and that's
far superior," said Tuna Amobi, an equity analyst at Standard &
Poor's. "It's all about perception."
(Editing by Steve Orlofsky)