DirecTV's prices are going up, thanks to higher programming costs. With the satellite operator paying more to carry local stations and sports networks, customers will bear some of the brunt, a company executive said Tuesday.
"Some of this is going to have to be passed on to the consumer," CFO Patrick Doyle said.
Broadcast networks have begun charging to carry their owned-and-operated stations. Plus, regional sports networks are also increasing carriage fees.
"It's important that the industry pass through the cost of this higher programming that we're seeing," he said at a UBS investor conference.
He acknowledged that the hikes carry a risk of losing subscribers. "To the extent that the market didn't bear that, I guess that would be an issue, but we feel very confident about other (revenue) streams." Those include a stronger VOD business, more dollars from DVR use and some ad sales.
DirecTV's programming costs will also go in 2011 as a result of its more expensive contract with the NFL for the "Sunday Ticket" package.
There is the threat of an NFL lockout, but DirecTV would still have to pay the league if that occurred. If the entire season is canceled, DirecTV has to make a minimum payment to the NFL, Doyle said.
But it would get a discount for rights in 2012 and other years, with another year added to its four-year deal. If only a game or three is canceled next fall, DirecTV would pay a pro-rated amount.
Separately, DirecTV has tried to persuade customers threatening to cancel premium pay channels -- HBO, Starz, etc. -- to continue with at least some. Since HBO's "The Sopranos" and "Sex and the City" ended, DirecTV has seen "a steady decline in our percentage of customers taking paid premiums."
To quell defection, it established a "save team," where staffers at its call centers offer incentives, discounts and other goodies to try to keep customers.
DirecTV is also counting on new ad sales opportunities to ignite revenues as it begins airing spots in local markets in 2011. Doyle said there are efforts afloat for addressable advertising late in the year.