Growing saturation in the U.S. pay-TV market and increased
competition from the low-cost online video streaming service
providers are forcing established pay-TV operators to restructure
their business models. Earlier this month, a Reuter report stated
), the largest satellite-TV operator in the U.S., offered $1
billion to acquire Hulu, the online video streaming service
provider. Various industry sources declared that the deal is in
the final stage and may be completed in the coming weeks.
Hulu is currently jointly owned by
Walt Disney Co.
). However, Comcast has no management control over Hulu as it had
been restricted by the Federal Communications Commission after
its acquisition of NBC Universal. Reuter reported that seven
firms have bidden for Hulu. Apart from DIRECTV, two other firms
have also offered $1 billion.
The U.S. pay-TV market is extremely competitive. In addition
to the traditional Cable TV and satellite TV operators, telecom
giants are also offering fiber-based high-speed video services.
In contrast, low-cost online video streaming services have also
become very popular especially when the economy is still reeling
In order to survive in this juncture, traditional pay-TV
operators are diversifying in related fields. Comcast acquired
content developer - NBC Universal - and deployed several
innovative services such as X1, Streampix, and high-speed
business services. Time Warner Cable is concentrating on
high-speed residential and business services. DISH Network is
desperately trying to deploy a nationwide wireless network.
Similarly, we believe that DIRECTV also needs to restructure
its business model and the decision to bid for Hulu is one such
step. Hulu commands over 4 million subscribers and generates
revenues of about $700 million per annum through subscriptions
and a free ad-supported service. Hulu will enable DIRECTV to
offer low-cost online video in addition to the company's
expensive premium-brand pay-TV package.
In the U.S., DIRECTV had 20.105 million subscribers at the end
of the first quarter of 2013. Although the company is still
generating net new subscribers, the rate of growth has slowed
down. In the last quarter, it added just 21,000 subscribers
compared with 81,000 subscribers in the year-ago quarter.
DIRECTV also has a solid footing in the Latin American
markets. However, even there, competitive pressure is gradually
increasing due to high-speed 3G bundled services of voice, video
and data offered by the large telecom operators.
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