That vulnerability, which could affect average revenue per user (ARPU), might surface because DirecTV tends to be more reliant on "discretionary" services, including NFL Sunday Ticket, than its rivals. According to Sanford C. Bernstein & Co. Inc. estimates, discretionary items made up more than 30 percent of DirecTV's 2008 ARPU, compared to about 21 percent for Comcast Corp. (Nasdaq: CMCSA, CMCSK)'s video-related ARPU.
"That said, satellite industry fundamentals continue to deteriorate, with subscriber growth declining precipitously and ARPU growth likely to be relatively more pressured than that of cable in a recession due to its greater reliance on video," Bernstein analyst Craig Moffett says in a new research note, adding that DirecTV owes recent ARPU growth to higher penetrations of hi-def and DVR services.
"Price increases are much more important to sustaining ARPU growth for the satellite operators than they are for their cable competitors, for whom the bulk of ARPU growth comes from increasing penetration of broadband and telephony," he adds.
He estimates that NFL Sunday Ticket comprised 10 percent to 11 percent of DirecTV's fourth-quarter ARPU. "An early test will be whether any meaningful number of NFL Sunday Ticket subscribers canceled their subscriptions in the wake of the economic disputation in the Fourth Quarter," Moffett notes.
The potential for ARPU deflation has not been lost on DirecTV, which increased prices in the range of 4 percent to 6 percent last week. That, Moffett estimates, will help DirecTV goose its 2009 ARPU by 3 percent to 4 percent. While economic growth of any kind is good in a recession, DirecTV's ARPU jumped 7.2 percent during the first three quarters of last year.
DirecTV posts its fourth-quarter results tomorrow afternoon. Bernstein expects revenues of $5.31 billion, earnings per share of 34 cents, 214,600 net sub adds, and ARPU of $91.35.
Dish Network LLC (Nasdaq: DISH) hasn't announced a fourth-quarter reporting date, but the analyst expects revenues of $2.93 billion, EPS of 53 cents, 88,000 net sub ads, and ARPU of $69.53.
— Jeff Baumgartner, Site Editor, Cable Digital News