DIRECTV or Dish? American consumers are still picking DIRECTV in greater numbers.  DIRECTV and Dish recently reported their earnings for the third quarter, and once again DIRECTV execs are smiling, while the higher ups at Dish have to be worried.

For the three months ending on September 30^th, 2008 DIRECTV added 156,000 net subscribers for the quarter. Overall, DIRECTV now has about 17.3 million subscribers in the United States. For the third quarter, Dish Network lost 10,000 subscribers. Overall, they now claim 13.8 million subscribers.

DIRECTV’s numbers were disappointing from the 2007 perspective. During the third quarter of ’07, DIRECTV added about 240,000 new customers, so this year’s number represented about a 35% drop. DIRECTV CEO Chase Carey remained upbeat, saying this was not due to the economy, but rather the loss of AT&T as a resale partner in the former Bell South territory.

DIRECTV will once again enjoy a partnership with AT&T starting in February 2009, offering the latest DIRECTV deals. AT&T currently sells Dish Network service as the third piece of a triple play offering, but only in neighborhoods where its own AT&T U-verse service is not available. While a potential AT&T-Dish Network marriage was a hot topic this time last year, it now looks to be completely dead.

Overall, the results show an uphill battle for Dish Network vs DIRECTV. While Dish has finally leveled the playing field with DIRECTV when it comes to HD, they have fallen far behind in subscribers. When potential subscribers now consider whether to go with DIRECTV or Dish TV, they often think about which company has more of a presence. DIRECTV advertisements are constantly playing, while Dish Network’s seem to be few and far between. I recently noticed Dish Network running ads for several weeks for their Turbo HD service, but those have too disappeared.

DIRECTV will have bundling agreements with all three major local telcos in 2009, the aforementioned AT&T, as well as Verizon and Qwest. Verizon has a similar resale agreement, where their Verizon FiOS service isn’t deployed, they offer DIRECTV as a video alternative. These too give Direct TV a leg up when the local phone company is suggesting DIRECTV with combined billing over Dish.

Overall, things continue to look up for DIRECTV over Dish Network. The year ahead will be an extremely challenging one as both companies look to build their subscriber base in an environment where consumers are cutting costs.

AT&T is divorcing DISH Network, and has found a new girlfriend in DIRECTV. That news, announced late yesterday spells big trouble for DISH Network, as they are losing their largest resale partner.

The new deal between AT&T and DIRECTV will not start until February 2009, as AT&T is still bound as a DISH Network partner until then. AT&T announced earlier this year that they would be dropping DISH Network at the end of the year, but that was mainly a negotiating tactic in order to strike the best possible deal with one of the satellite TV players.

AT&T had been partnering with DISH Network since 2003, selling the satellite service to its own customers across the country. AT&T has hedged its bets over the past few years, rolling out its own pay television service, U-Verse in many markets. While the service has begun to gain traction in many areas, the cost to AT&T has been high. AT&T has stated it expects to have 1 million U-Verse customers by the end of 2009. The time and labor involved in deploying the service also plays a factor in AT&T continuing to market a satellite service.

The news will no doubt fuel speculation about the future of DISH Network. Struggling with churn issues due to a slowing economy, DISH Network seemed to be getting back on the right track by expanding their HD channel suite including their 100% hi-def packages called Turbo HD.  While the company at one time was rumored to be a takeover target of AT&T, rumors of any sort of deal have been iced by the new DIRECTV-AT&T deal. Frequent rumors of a DISH Network-DIRECTV deal have also been in the news, but the current regulatory environment would not likely approve such a deal. Is there another player in the market who would be interested in DISH Network? If so, they would likely be able to negotiate a much better deal now considering the obstacles facing DISH Network.

For DIRECTV, the good news just keeps coming. On the heels of their dramatic HD expansion last year and their one-of-a-kind premium sports packages like NFL Sunday Ticket, the new AT&T deal will push DIRECTV into even more homes. DIRECTV already has resale agreements in place with the other two major telecom carriers, Verizon and Qwest. With the addition of AT&T, every customer served by AT&T, Verizon or Qwest who is looking for a video service will have the option of getting a DIRECTV deal with their phone and/or internet service carrier.

DIRECTV reported their quarterly results last week, and it was business as usual for the company, which continued to add subscribers despite the slowdown in the US economy.

For the second quarter 2008, which covers the months of April through June, DIRECTV added 129,000 new subscribers. Analysts predicted the satellite TV Company would add 122,000 subscribers, while the company added 128,000 in the same quarter 2007.

The second quarter is traditionally the slowest quarter for new additions for satellite television providers DISH Network and DIRECTV. DISH Network also reported earnings last week, and actually lost 25,000 subscribers during the last quarter.

DIRECTV continues to impress in the area of customer churn. Their customer losses were reduced to 1.49 percent versus 1.58 a year ago. DISH Network has struggled with their churn number, as it increased to nearly 2 percent during the most recent quarter. A number of factors have contributed to DIRECTV’s low churn rate, high among them their strong penetration in the advanced services area. These services, which include DVR and HD or high definition programming, hook customers as they enjoy the feature rich technology.

DIRECTV’s average revenue per subscriber, or ARPU increased as well to $81.80 a jump of 7% over last year’s number. The third quarter ARPU number should be interesting, as this is when subscribers pay up for the privilege of watching wall to wall NFL coverage with the Sunday Ticket package. Average revenue for those subscribing to advanced services like DVR’s or HD was over $100 a month.

Overall, it is quite remarkable that DIRECTV has been able to continue to add subscribers against strong competition from cable and Telco companies. Verizon FiOS and AT&T U-verse television services continue to expand, and Comcast and Time Warner have finally begun to up their HD offerings, while at the same time offering triple play bundles of voice, video, and high speed internet.

DIRECTV CEO Chase Carey continued to promote DIRECTV as the HD leader, downplaying DISH Network’s recent HD expansion. Carey said they have a position of leadership due to DIRECTV “being their first.”

Many parts of the country now have an additional choice when considering their cable TV options. These additional options are coming from the former Bell companies, AT&T and Verizon, as they now offer U-Verse and FiOS service, video services delivered over fiber and copper lines to each home. AT&T is ramping up their U-Verse service, aiming for a million customers by the end of 2008.

So how does AT&T’s U-verse service stack up with a satellite service like DIRECTV?

As with anything, there are several considerations, and it can be difficult to make an across the board comparison, but here are some facts and figures to consider when comparing U-verse to DIRECTV.

First, let’s consider a few of the U-Verse highlights.

U-Verse is a new initiative by AT&T to provide video services to residential customers via their existing network. In most areas, the actual service is delivered by VDSL technology, meaning it is not fiber to the home, (FTTH or FTTP), but is sent to a “node” in the neighborhood, then delivered by your existing copper line to your house.

The service is 100% digital, as is satellite service through DIRECTV. But since it is delivered by hard line, you can expect a little more reliability overall. While satellite TV has made vast improvements in delivering signal, it still goes out occasionally during intense weather.

AT&T U-verse service is available in four different programming package levels. They are the U100, U200, U300, and U400 packages. While DIRECTV offers television programming and that’s it, AT&T has bundle packages, which combine the cable TV product with your choice of U-verse internet and/or a Uverse home phone line. So while the prices quoted here for AT&T U-Verse service may seem a bit high, remember if you combine them with other  services, you will obviously get some sort of U-verse bundle discount. Every area can be different, so you will have to contact AT&T directly to get a quote on U-verse and other services combined.

First off, AT&T U-verse TVservice currently includes the following when you start up. Professional installation is included of course, and also one month free TV service.  Another promotion to consider it their $200 cash back deal. While the details seem long winded and extensive on this program, you basically have to sign up for U-verse and their high speed internet, fill out all the forms, and wait for your check in the mail. Check with AT&T for the exact details.

UVerse service currently has the following pricing tiers:

U100 – $69 for TV and high-speed internet, $44 for TV only. This package is the only AT&T package that does not include a HD receiver with a DVR. Package includes up to 100 channels and Video on Demand.

U200 – $84 for TV and internet, $59 for TV only. The U200 includes “up to 200 channels,” digital music channels, VOD, but no movie channels

U300 – $104 for combination TV and high speed internet, $79 for TV only. Package includes “up to 260 channels,” HD receiver, DVR, music channels, and Movie Package which has 30 premium channels of Starz, Showtime, Encore, and the Movie Channel.

U400 – $124 for combination, $99 for U-verse television only. This package includes up to 320 channels. Everything in the U300 plus all of the HBO and Cinemax channels, as well as extra regional sports networks are included here. This is the all-inclusive, all you can eat buffet package from AT&T.

As you can see, pricing on AT&T U-Verse is much higher than the promotional pricing you can receive from DIRECTV. Here are the current prices for DIRECTV packages, which reflect a discount of $18 a month for the first year. The only exception on this pricing is the Premier package, which has a discount tied in with the NFL Sunday Ticket package. Even after the first year discount, DIRECTV pricing is still lower than the U-verse pricing on the AT&T website.

How does U-verse from AT&T stack up with DIRECTV in other areas?

High definition programming is something most people are looking for today. HD access on the U-verse service is $10.00, and is $9.99 from DIRECTV. The big difference here is in the number of HD channels available. DIRECTV offers 95 national HD channels, as well as local HD in almost all major markets. AT&T U-verse offers 41 HD channels, and twelve of those are premium movie channels, so obviously quite a difference in this area.

Comparing DVR services is often difficult unless you can use each service for a period of time, then report back on what you like. As far as specifications go for the U-verse Digital Video Recorder, probably the most amazing thing is that it can record up to 4 shows at one time – wait, who needs to record 4 shows at the same time. Anyhow, it is there if you need it. One frustrating aspect of U-Verse is that there is a one DVR per household policy, and additional receivers cost $5 for the other TV’s in the house. With DIRECTV, you have the same fee for each additional receiver, but you can pay just $1 extra per month and get DVR service on every receiver as well.

As far as capacity, the U-verse DVR can hold up to 133 hours of SD programming, and 37 hours of HD programming, while the Direct TV DVR goes 200 and 50 hours respectively. Advantage to DIRECTV as far as DVR capacity goes. Other than that, the DVR’s have similar features such as programming menus, parental locks, and the ability to pause live TV and skip commercials on previously recorded shows.

Installation of U-verse and DIRECTV is one of those things that can go either way. Everyone has their horror story and wants to share it with the world, so individual experiences will of course vary. UVerse is in its infancy, so there is a learning curve going on in many areas, and AT&T has brought on board quite a few technicians in order to meet demand for U-verse. The AT&T website says installation will generally take 4-6 hours, and recommends setting a morning appointment. This of course would also include setting up your high speed internet connection as well.

In general, DIRECTV installations take between 2-3 hours. Work is often done by contractors, who are paid by the job, so they may work a little faster that the phone company. Expect to spend at least a half a day at home, whether you have either company hooking up your service.

AT&T currently has a resale agreement with DISH Network. If you call in to order U-verse and it is not currently available in your area, they will offer you DISH Network service, so if you want DIRECTV, you will have to order it separately from AT&T. This may change in 2009, as AT&T is evaluating who they will partner with in the future.

Finally, picture quality is the last item we will consider. This is no doubt highest on the list of those who have HD television sets, and the question they want answered first.

Who has the better picture? While wholly unscientific, browsing through the reviews you can find through a Google search can give you a general idea of what people think.   Most report that DIRECTV still offers better HD picture quality than AT&T U-Verse.

AT&T dealt a blow today to satellite TV provider DISH Network, announcing it would terminate its resale contract at the end of its current term. The contract, which runs until the end of 2008, allows AT&T to sell DISH Network television service across the AT&T service footprint.

AT&T has resold DISH Network service for 5 years now, starting in 2003. The news sent DISH Network stock down 4% on the day. While the news certainly can’t be considered good from DISH Network’s perspective, it may not mean anything in the long run.

The company has accelerated the deployment of their own pay television service U-verse, but building the service from scratch will take years. AT&T just started selling DISH Network service in the former Bell South territory that was recently merged into AT&T. Bell South formerly had a resale agreement with DIRECTV, as do Verizon and Qwest.

AT&T is publicly saying that they are not sure if they will sell satellite TV service at all in 2009. Right. AT&T will certainly continue a partnership with one of the big satellite providers, either DIRECTV or DISH Network when 2009 rolls around. There is simply too much easy money on the table in that game, as all AT&T has to do is promote and sell the service, no maintenance or troubleshooting of problems required. Without a satellite agreement with either DIRECTV or DISH Network, AT&T would also be restricted in selling so called “triple play” bundles, combinations of voice, video, and high speed internet services.

Obviously, AT&T is using the end of the contract to bargain hard for a sweet agreement with one of the satellite providers. If DIRECTV wins an agreement, they will further extend their lead in the satellite television battle. DISH Network needs AT&T more than DIRECTV does, and may have to give away the farm in order to forge a new contract.

DISH Network came out with their quarterly report after the market close today, and while the numbers look good, the subscriber count doesn’t.

The satellite television provider had 35,000 net subscriber additions for the 1^st quarter of 2008. That number was an 89% dive from comparable numbers last year, when DISH Network added 310,000 net subscribers. On the revenue and earnings front, the numbers looked better. Net profit came in at $258.6 million against $157 million a year ago. Per share that translated to 57 cents a share versus last years 35 cents. Revenues increased 7.5% to $2.84 billion, while average revenue per subscriber (ARPU) rose to $67.93 from $64.17 last year.

DISH Network’s total subscriber count now stands at 13.8 million, which is a 3% increase over the total subscriber count at the end of March 2007. But churn continues to be an issue for DISH Network, as it increased to 1.68 percent against 1.46 in the comparable period last year. DISH is now teetering on the edge of subscriber contraction, as it continues to battle DIRECTV as well as new players in the pay TV market including Verizon and AT&T.

Reviewing the company’s 10-Q filing with the SEC, a laundry list of reasons impacting DISH Network’s subscriber growth was presented. Among the reasons given:

• Expansion of Fiber-based pay TV providers
• Effectiveness of some competitors promotional offers
• The number of markets where competitors offer local HD channels
• Their aggressive marketing of these differences
• Satellite launch delays slowing growth of our local HD markets
• Worsening economic conditions, including slower housing starts
• Operational inefficiencies at DISH Network
• Signal piracy and other forms of fraud

According to DISH Network, the reasons listed above have affected both the ability to attract new customers, and have impacted their existing customer base.

DISH Network added 730,000 gross new subscriptions according to the 10-Q report. With that number being reduced all the way down to 35,000 for net additions, the full impact of customer churn is being felt by DISH Network.

After reviewing their quarterly results, Direct TV took questions from Wall Street about their numbers and what they foresee for the rest of 2008.

Goldman Sachs asked about any impact the economy and housing market was having on DIRECTV, and also if the upcoming digital transition was helping the company. Mr. Carey noted the economy was pretty much a non-factor in their business right now. He also noted that the digital transition was not really a factor either, as it doesn’t happen until February 2009, and people aren’t thinking about it. Numbers continued to be driven by HD, and DIRECTV has a “real window” in which they have a leadership position. That is what continues to drive subscription growth.

UBS asked about ARPU, average revenue per subscriber growth, and Latin American growth. Carey replied that the mix of advanced services, HD and DVR, combined with a price increase earlier this year contributed to the ARPU growth. Bruce Churchill commented on Latin America, saying the growth is not from one area, but three well performing nations, Brazil, Venezuela, and Argentina together.

Deutsche Bank asked about WiMAX technology, and if DIRECTV is looking at getting into the business, as DISH Network was a winner of some licenses at the recent FCC 700 megahertz auction. Carey said while WiMax and mobile video is something to monitor, it is probably a five year proposition. Nothing material will come in the next 1-2 years. Carey also mentioned “defining the customer appetite” for mobile video, meaning how much TV will people really want to watch on a tiny cell phone screen. Competition is a huge factor in this area as well, with AT&T and Verizon dominating the area.

Stifel Nicolaus asked about the impact Verizon FiOS and AT&T U-verse are having on DIRECTV. Interestingly, Carey separated the two, calling Verizon FiOS a “competitor” while downplaying the impact U-verse is having. Verizon is spending the money, and going after the customers where FiOS is deployed. DIRECTV feels they can compete with Verizon, but it does add the extra competition in those markets. According to Carey, AT&T is not a significant factor yet. “I think there’s a ways before it’s really a viable mainstream television option for American households,” was how U-verse was characterized.

Read DIRECTV Conference Call-Part 1

Read DIRECTV Conference Call-Part 3

AT&T continues to make progress in rolling out their video service, U-verse. In the latest quarterly results for the time period ending March 31, AT&T reported subscriber gains of 148,000. That brought the total number of U-verse subscribers up to 379,000.

While that is an impressive number, it pales in comparison to the big boys in the cable and satellite TV world. Comcast leads all pay television subscription service providers with more than 25 million, while DirecTV is a distant second place with nearly 17 million subscribers. So where is AT&T going to end up in the pay television market?

For the year, AT&T is forecasting that they will reach 1 million U-verse subscribers. That is an aggressive promise, considering they have less than half of that right now. One thing AT&T does have is deep pockets. Revenue for the 1^st quarter 2008 was $30.7 billion, while net income $3.5 billion, up from $2.8 billion in the 1^st quarter of 2007. The company is hiring new technicians and marketing the service aggressively to meet customer demand.

Overall, AT&T claims 2.6 million “total video connections” meaning U-verse customers + resale of DISH Network and DIRECTV customers. While speculation last year focused on AT&T making a play for DISH Network, their video expansion with U-verse indicates their willingness to build things from the ground up.

One Wall Street analyst is predicting a slowdown in DirecTV’s momentum.

Craig Moffett, analyst for Sanford C. Bernstein downgraded DIRECTV to a “market perform.”  Previously, the firm had DIRECTV rated as “outperform.” The downgrade sent DTV shares down 70 cents, nearly 3%, closing at $25.55 a share in heavy volume. At the same time, Moffett said he prefers DISH Network shares. DISH closed up 42 cents, up about 1.5%.

So why the downgrade, and why now? Wall Street recommendations are generally about as reliable as a broken clock, and I believe that is the case here. Moffett says DIRECTV will suffer in the second quarter for three reasons. Let’s review those reasons, and why I believe they are incorrect. As the year progresses, we will check back on Moffett’s analysis and my analysis. Using the respective share prices of DIRECTV and DISH Network as the year progresses will help us gauge the predictions of an amateur blogger vs. a Wall Street analyst.

Moffett’s first point is that DirecTV’s performance lately has been due to their HD leadership, and that will not be as much of a factor in the months ahead. Moffett’s reasoning behind this is that traditionally 70% of HDTV’s are sold during football season, September to December, and service providers follow the same pattern.

This year is different, as Americans are about to be flooded with tax rebate checks. Direct deposits of rebates will hit starting May 1^st, and paper check rebates will continue through mid-July. HDTV’s will be flying off the shelves, as the rebate amount for most couples will be $1,200. Right in the neighborhood of the amount needed to purchase that new Hi-Def television.

According to Moffett, the second factor that will hurt Direct TV is the housing crisis. He predicts a strong impact on gross subscriber additions, as fewer people are moving into new home. Here I see the point, but dispute that it will hurt DirecTV significantly, as it has DISH Network. DirecTV has a more affluent base, and tighter credit restrictions. They have reduced churn to extremely low levels, and their generally higher income subscriber base is just not as susceptible to “bad housing market” issues.

Finally, Moffett’s third factor in downgrading DirecTV is the fact that the former Bell South territory once known as Bell South has stopped selling Direct TV, and is now selling DISH Network, the AT&T satellite TV partner. While no doubt true, this has been known for some time. With the stock market being a forward-looking mechanism, DIRECTV and DISH Network’s share prices have reflected this news for months. While the actual numbers from this area will of course tilt toward DISH Network, DIRECTV still has several advantages.

I see two main advantages for DIRECTV appreciating in price more than DISH Network by year-end.

First, the HD advantage. DIRECTV has executed their HD expansion plan in a nearly flawless manner over the last 9 months. They have more HD channels, and more of the HD channels that people actually want. With the successful launch of DIRECTV 11, and the failure of DISH Network’s satellite AMC-14, the HD race may become a runaway by the end of the year. DIRECTV should actually have excess capacity later this year, and may be waiting for operators to provide them with additional HD content. On the other hand, DISH is stretched as it is, counting on two satellites that haven’t even left Earth.

Second, the Liberty Media factor. John Malone’s company acquired 41% of DIRECTV earlier this year. While Liberty was initially coy about how much more of DIRECTV they would acquire, about a month later they upped their stake to 48%.

Clearly, Malone wants to play in the sandbox with the big boys. Liberty has an interest, and more importantly the means to fully take over DirecTV if it so wishes.

Reports from the Wall Street Journal indicate that ATT may be on the prowl for either Dish Network or DirecTV.

So what would you pay for one of the companies? $30 to $40 billion should do the trick, according to the report. That actually seems a little low looking at the current value for the companies. DirecTV currently carries a market capitalization of around $30 billion, and Dish Network/Echostar is currently valued at about $21 billion.

Whatever shakes out of this, serious dollars are being thrown around in order to capture the attention of households across america. Cable companies, offering triple play packages including phone, cable TV, and high speed internet have been pressuring both old school phone providers such at ATT, as well as the satellite TV players.