• by Wayne Friedman , August 10, 2007

As DirecTV shifts to a new owner, the company witnessed a slip in second-quarter net income of 2% to $448 million, due to higher costs in grabbing new subscribers.

Lower results were the result of higher upgrade and acquisition costs related to the increased HD and DVR services for new or existing customers. DirecTV noted that cash flow before interest and taxes and free cash flow declined to $305 million and $201 million, respectively, also because of an increase in capital expenditures.

DirecTV says its subscriber acquisition costs grew 11% during the period to $447 million--part of this comes from money for a new marketing campaign touting new services and products: HD channels and a new HD DVR.

Revenues at the company continue to climb--up 17% to $4.14 billion during the period. The company notes a 7% hike in the average money a subscriber spends on DirecTV, now at $76.43 per month. DirecTV added a net 128,000 subscribers in the U.S. It said its monthly churn dropped to 1.58% versus pervious periods.

DirecTV is focused on new technology and programming improvements, especially HD channels. Right now, the company has agreements for 90 HD channels. About 70 to 100 channels will be operational by the end of the year. Next year, DirecTV expects to have the capacity for 150 channels.

Also, DirecTV is rolling out a VOD product/service for consumers that will have broadband capability, says Chase Carey, president/CEO of The DirecTV Group. "What it is really going to be is a product that will be integrated into the customer experience," he said. Chase wants to make DirecTV VOD service more accessible than what cable networks have offered.

Overseas, DirecTV Latin America had revenues grow more that double to $409 million.

News Corp.'s recent deal to sell DirecTV to Liberty Media--which unwound Liberty Media's large financial stake in News Corp.--should give DirecTV some new freedoms, Carey adds. "Liberty Media doesn't have the same degree of sister businesses [as with News Corp.]. It'll give us a greater degree of flexibility."