DIRECTV 2012 Annual Report Download - page 27

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DIRECTV
(2) the optimization of acquisition and retention spending and opportunity for DIRECTV. For example, although historically we
(3) enhancing productivity and cost containment. have competed effectively in the higher-end hotel market, we
expect that in the coming years, hotels will be upgrading their
•Grow Revenue Streams. Due to the rising cost of programming in the television service from standard-definition to HD which will
maturing pay television marketplace, driving top line sales has become present us with opportunities for growth. In the future, we will
increasingly critical to maintaining strong profit margins. In order to introduce new features, applications and package enhancements
achieve this objective we must grow revenues through (1) responsible that will provide an integrated residential television experience for
pricing and (2) maximizing ancillary and non-residential revenue our hotel customers to offer to their patrons. We also currently
opportunities. have low market share in the private businesses and smaller bars
•Responsible Pricing. We believe our ability to generate the and restaurants segments and we intend to grow our share in
industry’s highest average revenue per unit, or ARPU, these markets by developing an integrated bundling solution, as
demonstrates the value our best-in-class video experience delivers well as from improved management, targeting, billing, pricing and
to our customers. It is imperative that we maintain appropriate packaging.
price increases on our differentiated service offerings, while •Optimize Acquisition and Retention Spending. Although we continue to
simultaneously expanding the value proposition by advancing the invest in new subscribers with a disciplined focus on driving value
customer service and entertainment experiences. It is also critical through quality, attaining strong financial returns on new subscribers
that we remain disciplined in the management of subscriber has been increasingly difficult in this maturing industry where
credits and promotions. For example, in 2012 we introduced an programmers are seeking even higher rates for their content. Therefore,
Advanced Receiver Service fee on our customers’ bills eliminating in 2012 we transitioned to a new customer acquisition strategy that
‘‘Free HD for Life’’ as well as a lower cost programming reduced our promotional discounts for new customers and shifted our
‘‘Entertainment’’ package to better fit the needs of our more value investment towards increasing our upgrade efforts for tenured and
conscious consumers. These actions have reduced customer credits high-value existing subscribers, which yield stronger returns. Our
and are expected to increase ARPU over the coming years. revised upgrade policy is expected to improve customer satisfaction,
•Maximize Ancillary and Non-Residential Revenues. We believe we reduce churn and increase profitability by driving greater penetration of
have an opportunity to drive top line growth through ancillary advanced services such as DIRECTV Genie and the Connected Home.
and non-residential revenue opportunities, including DIRECTV •Enhance Productivity and Manage Costs. Improving our productivity is a
CINEMA, addressable and local advertising and the commercial critical element of our goal to maintain strong margins particularly
property market. In 2013, we expect to continue generating given rising programming costs and the competitive nature of our
incremental VOD revenues by ‘‘pushing’’ top-rated movies, industry. In particular, we plan to focus our efforts on (1) effectively
including many available on the same day of the DVD release, managing our programming costs and (2) capturing enterprise-wide
onto customers DVRs for instant viewing and by expanding the productivity improvements.
video library of our enhanced movie service called DIRECTV
CINEMA. We are also looking to significantly increase our • Effectively Manage Programming Cost Growth. Programming costs
advertising revenues over the coming years with a new technology are DIRECTV’s largest expense and as a result, we must manage
that provides us the capability to insert ads into individual DVRs these costs as effectively as possible particularly considering that
enabling advertisers to target customers in local regions and we expect programming costs to grow faster than ARPU primarily
eventually in the individual home. In addition, we believe due to higher sports costs (including the NFL SUNDAY
commercial properties represent another incremental revenue TICKET) and higher retransmission fees for the carriage of local
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