DIRECTV 2002 Annual Report Download - page 5

3
DIRECTV’s key operating metrics,
namely lowering the rate of customer
turnover – or churn – increasing the
average monthly revenue per subscriber
and reducing costs.
Lowering the Customer Churn Rate.
Given the size of DIRECTV’s customer
base – which was more than 11 million at
year-end 2002 – and the substantial
investment we make in adding new sub-
scribers, our ability to keep customers
satisfied is absolutely critical to the long-
term profitability of the company. In
2002, we continued our efforts to
improve every aspect of the DIRECTV®
customer experience, and for the year,
we met or exceeded our internal targets
for every key customer service and instal-
lation metric. These efforts are clearly
beginning to pay off. In 2002,
DIRECTV ranked “#1 in Customer
Satisfaction Among Satellite and Cable
TV Subscribers” by J.D. Power and
Associates(1). We also received a num-
ber one ranking for customer satisfaction
in the communications industry by the
American Customer Satisfaction Index.
In addition to providing excellent cus-
tomer service, we continued our policy
requiring new customers to commit to
one year of service in order to take
advantage of a DIRECTV-funded pro-
motional offer, and now approximately
95% of new DIRECTV customers are
making an annual service commitment.
This is critically important to us because
subscriber churn drops considerably
once a customer has been with
DIRECTV for one year. We also
enhanced our credit screening practices
to intensify our efforts to attract cus-
tomers with higher-quality credit charac-
teristics. As a result of all these
initiatives, customer churn of 1.6% per
month in 2002 was the lowest it has
been in three years, and significantly
better than the churn of 1.8% per month
in 2001.
Increasing Average Monthly Revenue
Per Subscriber. We’re constantly look-
ing for ways to generate increased rev-
enue from our service – a particularly
important priority since content
providers continue to raise rates on an
annual basis. Our focus on attaining
high-quality customers provides
DIRECTV with a solid foundation to
achieve this goal since these customers
are more likely to purchase and pay for
additional programming services. During
2002, we were able to increase average
monthly revenue per subscriber by intro-
ducing new programming packages that
included several additional channels at
slightly higher prices. By improving the
value proposition, many of our cus-
tomers upgraded their programming
packages. In addition, we were more
aggressive in promoting consumer offers
that cater to customers with more than
one television in their home.
Every major strategy we
pursued – and business
decision we made – was
predicated on achieving
profitable growth and
maximizing cash flow
Customers receiving the DIRECTV ser-
vice on multiple televisions are important
because we collect approximately $10 to
$15 more revenue per month and these
customers churn at roughly half the rate
compared to customers with only one
set-top box.
As competition with cable operators
remains fierce, the importance of provid-
ing local channel service to our cus-
tomers is paramount. During 2002,
DIRECTV expanded its local channel
coverage by 10 additional markets, and
as of year-end, local channels were avail-
able from DIRECTV in 51 top markets
across the country covering about two-
thirds of the nation’s homes. Local
channel service not only affords
DIRECTV the ability to compete on a
more equal footing with cable, but also
generates an added source of high-profit-
margin revenue. In 2003, we expect to
continue to expand our channel capacity
with the launch of DIRECTV 7S, a new
high-power spot-beam satellite that is
expected to extend local channel service
to approximately 100 markets, covering
approximately 90 million homes, or 84%
of the nation’s television households.
As a result of all of these initiatives, we
were able to increase DIRECTV’s aver-
age monthly revenue per subscriber by
more than $1 during the year, and
ended 2002 with an industry leading
average video revenue of nearly $60
per month.
Reducing Operating Costs. Cutting
costs and improving operating efficien-
cies have taken on a new level of impor-
tance at DIRECTV and during 2002,
we dedicated a lot of energy toward
(1)
J.D. Power and Associates 2002 Syndicated
Residential Cable/Satellite TV Customer Satisfaction
Study
SM
. Study based on 3,995 satellite/cable TV
subscriber responses. www.jdpower.com