El Segundo, Calif. — Continued strong subscriber growth and higher average monthly revenue per subscriber helped the DirecTV Group U.S. segment increase second-quarter revenue by 34 percent, hitting $2.96 billion, up from $2.2 billion in the year-ago period.
Gross profit generated from the higher revenue nearly tripled second-quarter operating profit at DirecTV U.S. to $505 million, before depreciation and amortization.
Operating profit increased by a factor of five to $333 million compared to last year’s second quarter due to the increase in DirecTV U.S. revenues combined with higher operating margins primarily resulting from the stabilizing of costs in key areas such as subscriber acquisition and upgrade and retention marketing. Operating profit was negatively impacted by higher amortization expense resulting from intangible assets recorded as part of the NRTC and Pegasus transactions.
DirecTV said its margin more than doubled to 17 percent.
Average revenue per subscriber increased over four percent to $67.79 from the same period last year, due to programming package price increases, higher mirroring fees from an increase in the average number of set-top receivers per customer and an increase in the percentage of subscribers purchasing local channels.
Cumulative U.S. subscribers reached 14.67 million in the first quarter, compared with 13 million in the same quarter a year earlier. Gross platform subscriber additions declined to 964,000 from a year-on-year 984,000, while net platform subscriber additions came in at 225,000 down from 409,000 in the 2004 period.
DirecTV’s net subscriber additions of 225,000 were lower due to a disappointing average monthly churn rate in the quarter of 1.69 percent, up from 1.49 percent a year ago, primarily resulting from an increase in involuntary churn of high-risk customers attained over the last several quarters.
To correct the problem, DirecTV implemented at the beginning of the second quarter new policies for subscribers with low credit ratings, including requiring upfront payments of between $150 and $200, to help reduce churn.
Average monthly revenue per subscriber climbed to $67.79 in the second quarter, an increase over the $65.01 recorded in the prior-year period. Average subscriber acquisition costs per subscriber rose to $646, compared with $643 in the second quarter last year.