DirecTV customers: Your bill is going up again
CEO Michael White says DirecTV will need to raise prices next year to combat ever-climbing content costs, but the hike won't be quite as big as the one this year. Don't hold your breath for a Dish combination, either.
NEW YORK -- On the heels of a rate increase this year, DirecTV will be ratcheting up its customers' bills again next year.
"Prices will have to go up again because content costs are going to go up again," Chairman and Chief Executive Michael White said at a Goldman Sachs investor conference Wednesday.
Programming costs -- what operators pay to networks for the right to distribute their channels -- have been surging recently. It has resulted in climbing bills for cable and satellite customers and tense contract face-offs between the content creators and distributors.
For example, White said DirecTV's retransmission fees, a type of programming cost, have risen 50 percent so far this year and have surged as much as sevenfold since 2010. Retransmission fees are payments made to broadcast networks to carry their programming.
While White said that DirecTV's price increase won't be as high as the, it would still be "meaningful."
He also said the satellite television provider, which is the second biggest pay-TV provider in the country after Comcast, was seeing people drop service because of their increasing bills.
"I certainly see an impact from the consumers this year on churn in terms of their feelings about the build," he said.
He was downbeat about the idea of big mergers succeeding in the current regulatory environment. Dish Chairman and CEO Charlie Ergen, in the past, has said combining the two satellite companies would make sense as a way to fend off the rising tide of programming costs, and White has indicated he was open to the idea.
Wednesday, White pointed to regulators foiling AT&T's attempt to take over T-Mobile and the government's protests over American Airlines proposed merger with US Airways, both as indications that big deals must fight an uphill battle.
"There's no question that it is a very challenging regulatory environment for any deal to get done," he said.
The continually climbing price of pay television has stoked a small but growing contingent of viewers to forsake pay-TV subscriptions for online on-demand services like Hulu and Netflix, a phenomenon known as cord-cutting. Earlier this year, DirecTV was among several bidders to buy Hulu, which White said Wednesday would have been a complementary opportunity for his company.
But he also indicated DirecTV has lost its taste for a Hulu-like service.
"I frankly don't see us doing a broad-based, I'll call it, general product, like a Hulu kind of a thing," he said.
The owners of ad-supported Hulu and subscription service Hulu Plusearlier this year -- again. 21st Century Fox, Comcast's NBCUniversal, and Walt Disney instead chose to infuse the site with a $750 million investment. The parents had attempted a sale in 2011 as well, only to keep Hulu in the fold.
White said that DirecTV was looking at targeted ways to have an over-the-top service, but didn't provide details.
With DirecTV bills set to rise again, having some sort of a cord-cutter service may not be a bad idea.