), the largest satellite TV operator in the U.S., has started
charging an extra fee of $3 per month from some of its new
customers on program packages, which include multiple sports
channels. DirecTV follows in the footsteps of rival
Time Warner Cable Inc.
), which is charging nearly an extra $4 per month for the sports
DirecTV' is charging the monthly surcharge in the regions
where there are multiple regional sports channels including
) Prime Ticket, Fox Sport's West and Time Warner's SportsNet.
However, the additional fee structure will only affect 20 percent
of the total 210 markets in the U.S.
The additional monthly fee of $3 will be levied on all the
channel packages above the lowest tier. The lowest tier starts at
$30 per month. The next step, called "choice" starts at a
promotional price of $35 per month, exclusive of any extra fee
and includes 10 more channels including the local sports
Recently, DirecTV inked a deal with Time Warner Cable that
will allow the satellite TV provider to broadcast the cable
company's two sports channels in the Los Angeles area. The deal
puts DirecTV in a winning position against arch rival
DISH Network Corp.
), which is still negotiating with Time Warner cable over a
Sports entertainment has become the most expensive form of
programming with nationwide sports channels charging as much as
$5 per month per subscriber while regional sports channels are
charging only $2-$3 from their customers. DirecTV has argued that
the additional fee will allow the company to recover some of the
sports entertainment cost in some of the market.
The rising sports programming cost is based on the fact that
the network owners are winning the right to broadcast the games
and then passing on the higher cost by raising the program fees.
We believe that the regional sports surcharge is an attempt by
DirecTV to reduce their expenses by passing on the rising
programming cost to the customers. Nevertheless, the company
faces the risk of higher customer churn as continuous hike in pay
package rise may induce the customers to think about other
We maintain our long-term Neutral recommendation on DirecTV.
The company also retains a Zacks #3 Rank, implying a short-term
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