How DIRECTV Still Thrives in the Streaming Era

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This may be the golden era for streaming content. Just think of all the great companies that now stream endless movies and shows to millions of customers. Netflix, Amazon and Hulu are top of mind, of course, but there are also all the live TV streaming players as well, such as Sling TV. So how is it possible that DIRECTV, a satellite TV provider, has managed to thrive in the streaming era?

#1: Satellite customers are different

According to the most recent estimates, DIRECTV had 21 million subscribers as of Q1 2017. At a time when the mainstream media is filled with stories about “cord-cutters,” that number seems remarkable. From the tone and tenor of the media stories, you would have thought that DIRECTV was down to a few thousand subscribers in a few scattered geographic locations!

But the reason DIRECTV continues to thrive is because there’s a very big difference between cable customers and satellite customers. The reality is that the entire country is not served by cable, and in some geographic regions, the only choice is satellite. If you live in a mountainous region, or if you live in a very isolated rural region, your only real choice may be satellite. And that’s why DIRECTV has spent so much time and effort making sure that it satellite coverage is simply unbeatable. It means delivering a very clear, very crisp image no matter where you are located in the United States.

Moreover, most people think of satellite TV as a consumer product. It is, of course. But there is also a very important “DIRECTV for business” component of the business. Think about bars, restaurants, hotels, dormitories or hospitals – they also get TV service. And for many of them, DIRECTV is the provider of choice. Part of that has to do with the choice of content. Think about hanging out at a sports bar – there are games on from every part of the country, and the only way you’re going to get that kind of coverage is via satellite. Hotels, too, need to cater to visitors coming from all over the country.

#2: Top-rated customer service

There are a lot of jokes about “the cable guy,” but do you ever hear jokes about “the satellite guy”? No, not at all, and that’s because satellite TV providers like DIRECTV are laser-focused on providing the best possible customer service. Check out the home page of DIRECTV – it’s filled with “#1 in customer service” awards.

And that makes sense, right? DIRECTV knows that you’ve got to install a satellite dish to get reception, and they also know that satellite coverage may not always be as reliable as cable coverage (especially in densely populated urban areas), so they really have to be very focused on customer service. So, many people love DIRECTV for its great customer service – they can’t imagine switching to someone else.

#3: Exclusive programming content

In the media and the entertainment world, there is nothing more important than “the exclusive.” It’s the reason why some pop culture magazines are willing to pay millions of dollars to get “exclusive photos” of a celebrity. It’s the reason why TV news programs tout “exclusive interviews.” It’s the reason why music services tout that some albums are “available exclusively” on their service.

And guess what? DIRECTV also has plenty of “exclusives” that makes it such a favorite with customers. One of those exclusives is NFL Sunday Ticket. If you’re a serious NFL football fan, you might sign up for DIRECTV solely to get access to NFL Sunday Ticket. That’s because DIRECTV has exclusive rights to NFL Sunday Ticket. If you don’t get DIRECTV, you don’t get NFL Sunday Ticket. So the more exclusives that DIRECTV is able to offer, the stronger its value proposition becomes.

#4: Synergistic mergers

One of the biggest buzzwords in the world of Wall Street investment banking is “synergies.” Bankers will convince two companies to merge, promising all kinds of synergies that will result from the deal. The company will get leaner and meaner, and will realize all kinds of cost efficiencies. In most cases, those “synergies” are just a buzzword. But in the case of DIRECTV, recent mergers really have led to a number of important synergies.

The first example is the July 2015 merger & acquisition deal, in which AT&T paid $48.5 billion for DIRECTV. This was a huge deal for so many reasons. First and foremost, it gave DIRECTV access to some very deep pockets. It meant that AT&T could promote DIRECTV any time it was promoting its other services. And it could give customers very strong incentives to sign up for DIRECTV.

The second example is the pending AT&T–Time Warner deal, in which AT&T will acquire Time Warner for $80 billion. At first glance, this wouldn’t seem to affect DIRECTV, right? Well, think of all the content at Time Warner. Well, that’s a lot of content that is now going to be made available to DIRECTV in some form. And remember what we said about “exclusives”? One of the most important Time Warner properties is HBO, and the ability to make exclusive offers based around HBO could become very powerful indeed for DIRECTV.

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#5: New innovations like 4K

In November 2014, DIRECTV became the first-ever company to offer 4K ultra-high definition content. That’s a great example of how DIRECTV has really stayed out in front when it comes to innovation. Delivering a remarkable 4K picture is something that it is going to become increasingly important as TV viewers embrace 4K TVs. Of course, right now, the average 4K TV is still wildly too expensive. Thus, there hasn’t been a lot of demand for 4K programming. But that day is coming soon, and DIRECTV is ready to become a leader when it does.

Also, here’s another example of great innovation from DIRECTV: the company partnered with Boeing and its Connexion service to offer in-flight TV and Internet for air travelers. This is because DIRECTV has all those satellites in geosynchronous orbit around the Earth – that makes it much easier to deliver a strong signal to airplanes that are flying 30,000 feet above the Earth’s surface!

#6: Creation of a new streaming competitor

Perhaps the best reason why DIRECTV continues to thrive in the streaming era is because it has been working on a streaming competitor of its own, known as DIRECTV Now.

For AT&T, the decision to release DIRECTV Now in November 2016 was a difficult one. First of all, there was the risk that DIRECTV Now would “cannibalize” DIRECTV. In other words, there might be a flood of new customers who embrace DIRECTV Now, but all of them would be coming from DIRECTV! And, even worse, the customers for DIRECTV Now would be paying less than the customers for DIRECTV. So AT&T had to take very careful steps not to cannibalize its existing service.

But now it looks like DIRECTV Now and DIRECTV are going to peacefully co-exist. One key, says AT&T, is that DIRECTV Now is going to be positioned differently than DIRECTV. According to executives, DIRECTV Now is going to poach customers away from the likes of Netflix and Amazon Prime Now, not from DIRECTV.

#7: Inertia

Finally, it’s important to mention one of the most important forces at work in the world of business, and that’s inertia. In short, unless there is a very compelling reason to switch, most customers won’t. Even if they don’t use a product, or are tired of using a product, they won’t switch. That’s why so many companies try to convince you to sign up for auto-pay paperless monthly billing. They may talk about saving the environment by getting rid of paper, but that’s just a smoke screen. The real reason is because it is much more likely that you will quit if you’re getting an annoying bill in the mail. It’s just human psychology. But if you are being billed online, and the funds are automatically being deducted from your bank account, it’s almost impossible to quit. You may even forget you’re being billed.

So, when the first streaming competitors arrived, there was a very real risk that they were new and interesting enough that customers might overcome their inertia and switch. But now guess what? The gap is narrowing between streaming and satellite. In many cases, the services are starting to look completely identical. Some customers are starting to regret the loss of so many TV stations, and are putting an end to all that “cord-cutting” nonsense.

Conclusions

Ultimately, DIRECTV is still thriving in the streaming era because it offers a best-in-class product at a reasonable price to very loyal customers. And it continues to innovate with new service offerings  – such as an amazing new Genie HD DVR system – that are clearly better than anything else in the marketplace.

At the end of the day, TV viewers like the ability to watch hundreds of “live” stations. They are tired of making sense of confusing “skinny bundles.” They are tired of trying to figure out the difference between “Orange” and “Blue.” They are tired of signing up for multiple services (Netflix + Hulu + Sling TV) just to recreate what they already had with satellite TV. They are tired of reading all the fine print of what networks are available in which region. What they want is what DIRECTV offers – a comprehensive selection of live TV programming, combined with great on-demand offerings, all at a reasonable price.

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