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UPDATE 2-DirecTV at work on Internet video service
December 13, 2013 / 1:20 AM / 4 years ago

UPDATE 2-DirecTV at work on Internet video service

By Liana B. Baker

Dec 12 (Reuters) - DirecTV Chief Executive Officer Mike White said on Thursday the satellite TV operator was developing an Internet product that it would sell separate from its core video service, giving it a new business as growth in the U.S. pay TV market begins to slow.

White said the online service would feature niche programming that could be either based on a theme or targeted at a certain demographic.

He said in an interview on the sidelines of the company’s investor day that the Internet-based service would likely have fewer channels than customers are used to seeing in a large pay-TV package.

“I don’t see it as 200 channels of broad based (content),” White said. “If you want to do something, you want to be differentiated and distinctive.”

Media companies usually balk at selling anything but a full suite of channels to cable or satellite operators. These programmers count on “bundling” lower-rated channels with popular ones, a practice that could challenge DirecTV’s ambitions.

White said he viewed the Hispanic market as an opportunity for the new service. But he said it was too early to announce details as the company negotiates video rights. It may announce something in the next 12 months, he said.

He added that an online service could appeal to “millennial cord cutters,” basically young people who do not want to buy a monthly cable or satellite subscription.

DirecTV explored buying online TV service Hulu earlier this year, but now believes a homegrown service is the way to go.

“There’s not much out there to buy beyond Netflix and Hulu,” White said during a question and answer session with investors.

LATAM GROWTH CUT

DirecTV said on Thursday it expects compound annual growth of more than 15 percent in earnings per share by 2016, while also flagging slower-than-expected revenue growth in the important Latin American region.

DirecTV said strong subscriber additions would help it reach earnings per share of $8 by 2016, slightly ahead of Wall Street forecasts.

The company’s projections exclude results from Venezuela due to the country’s huge currency devaluation.

At the same time, the DirecTV acknowledged that Latin America, long seen as a big potential growth area, would remain troubled, depressed by currency weakness in Brazil and Argentina as well as Venezuela, as well as costs related to the soccer World Cup and capacity expansion.

Revenue for the region is now seen at $8 billion to $9 billion, down from a prior forecast of $10 billion.

At the same time DirecTV expects significant improvement in cash flow starting in 2014 and an acceleration in those improvements through 2016.

Earnings per share for 2016 is seen at $7.62, according to the Thomson Reuters I/B/E/S consensus, while fully reported EPS is seen at $7.34.

DirecTV’s shares closed 10 cents higher at $67.02.

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