DirecTV's (DTV.O) record number of quarterly subscriber additions show that even in a tough economy Americans will pay up for one of their favorite pastimes -- live sports on TV.
The leading U.S. satellite TV provider posted higher quarterly profit on Thursday as it won U.S. video subscribers away from rival cable companies with the giveaway of its exclusive National Football League games package.
But the company missed analysts' average profit forecasts due to expenses related to its rapid rate of customer additions and rising programing costs including the multibillion-dollar NFL contract.
DirecTV shares earlier rose more than 7 percent.
During the third quarter, DirecTV added more than 327,000 customers in the United States which it said was its highest figure in seven years for net additions in the third quarter.
DirecTV heavily promoted its NFL Sunday Ticket $300 package of out-of-market football games, offering it free for a year as an incentive for new subscribers who switched from a rival service.
Chief Financial Officer Patrick Doyle said the promotion ahead of the NFL season opening had been more popular than we anticipated.
The test of the success of our promotion will be the renewal rate next year, said Chief Executive Michael White, who added that the company will have a much bigger pool of customers to upsell in a year's time thanks to the promotion.
The satellite company agreed to pay around $4 billion for the four-year exclusive rights to NFL live games in 2009.
Their promotion worked, this is twice as many additions as last year and thrice as much as the Street had been expecting, said Brean, Murray, Carret & Co analyst Todd Mitchell.
Executives said they do not expect to add as many net subscribers in the fourth quarter following the promotion but still expect to do better than the second quarter when the company added just 26,000 U.S. subscribers.
In the United States, the company increased average revenue per user (ARPU) to $92.21 due to price increases on programing packages and leased set-top boxes. It also managed to lower its average monthly rate of customer losses -- also known as churn rate -- down to 1.62 percent.
DirecTV U.S. ended the quarter with 19.8 million customers, closing in on the largest U.S. video provider Comcast Corp, which has been losing customers and which had 22.4 million video subscribers at the end of the quarter. DirecTV's smaller satellite rival, Dish Network Corp, has also been losing subscribers in comparison.
DirecTV is buying market share, this speaks to weak results for Dish when they report, added Mitchell.
Satellite companies have at times been disadvantaged in competing for video customers with cable companies who are able to bundle discounted high speed Internet and phone services.
To that end DirecTV said it has extended its partnership with AT&T Inc (T.N), in a new three-year partnership to jointly sell video, Internet, fixed line and wireless phone services. In a separate agreement DirecTV also sells DirecTV also sells AT&T's U-Verse High Speed Internet.
Third-quarter profit rose to $516 million, or 70 cents a share, from $479 million or 55 cents a share a year earlier. Analysts had forecast 73 cents a share according to Thomson Reuters I/B/E/S.
Revenue rose 14 percent to $6.84 billion.
DirecTV also had strong subscriber growth in Latin America where it added more than 574,000 customers. The company raised its outlook for the unit on most of its metrics as growth accelerated in the market.
DirecTV shares were up $2.75 at $47.61 on the Nasdaq.