DirecTV pursues 'perfect 90-day install,' in shift from subscriber acquisition to retention

After seeing increases in the number of new subscribers who cancel subscriptions within the first 90 days of service, DirecTV (Nasdaq: DTV) has developed a retention program called the "perfect 90-day install," CEO Mike White said Thursday.

White

"One of the things we learned last year is that if we screw up the first 90-day experience with a new customer, the churn impact is dramatic," White told analysts on DirecTV's fourth-quarter earnings call. While DirecTV generated 4.3 million gross subscriber additions in 2011, it saw a whopping 3.6 million subscribers drop their subscriptions, either voluntarily or because they failed to pay their bills. That left it with net subscriber additions of 662,000.

With DirecTV programming costs from contracts with programmers such as Fox Broadcasting and the NFL eating into its profit margins, White detailed a strategy that will see DirecTV focus on retaining its most valuable customers with improved operations at its call centers and more efficient service from installers and field technicians. DirecTV has started a pilot program in a few cities that allows it to adjust the service call schedule for its field technicians throughout the day "as jobs take longer or shorter" than expected. He said DirecTV has also invested in call-center software that helps it reduce the amount of "handle time" agents have with a customer.

For years, DirecTV has been known to invest heavily in aggressive national marketing campaigns aimed at luring new subscribers through promotional offers tied to programming such as its exclusive "NFL Sunday Ticket" package. It has also offered steep discounts to new customers, and wooed existing customers with credits on their bills aimed at dissuading subscribers from switching to Comcast (Nasdaq: CMCSA), Dish Network (Nasdaq: DISH) and other pay TV rivals.

But in order to generate profits for the long term, DirecTV is switching gears to focus on retaining existing customers, and selling subscribers advanced services such as its whole-home DVR. Cable MSOs have pursued a similar strategy focused on boosting average revenue per subscriber by marketing products such as wideband Internet access.

DirecTV CFO Patrick Doyle said that DirecTV will reduce the amount of discounts that it offers to new customers, and be "more disciplined in our pursuit of higher-value subscribers."

Here are some other items worth noting from DirecTV's earnings call:

• Asked when DirecTV plans to begin marketing Nomad--a device that allows subscribers to transfer programming stored on a DVR to a tablet or mobile phone--White said, "We need to get some more content rights for it."
• More than 2 million DirecTV subscribers have ordered DirecTV's new HD DVR, and signed up for its Connected Home service.
• White said he is "pleased" with the number of net subscriber additions and DirecTV's churn rate since January. "I'm expecting a good [first] quarter," he added.

For more:
- see DirecTV's Q4 earnings release
- and the transcript from DirecTV's earnings call

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