While expansion into Latin America hasn’t proven easy for subscription-based U.S. media service providers, DirecTV is beginning to provide examples of the payoff.
The El Segundo, Calif.-based satellite TV service company reported Tuesday that it added 593,000 subscribers in Latin America during the first quarter. Its revenue from the region also increased by 33 percent to nearly $1.5 billion during the quarter.
The Q1 performance follows a similar uptick of 590,000 Latin American subscribers for the fourth quarter. It also comes amid slowing subscriber growth for DirecTV in the U.S. — the company added only 81,000 domestic customers in Q1, off from investor forecasts of around 92,000.
For the three months that ended March 31, DirecTV’s total revenue rose to $7.05 billion from $6.32 billion a year earlier, principally due to the increase in Latin American subscriptions. DirecTV ended the first quarter with 20 million subscribers in the U.S. and 8.5 million in Latin America. Last year, Latin America accounted for $5.1 billion of DirecTV’s total global revenue of $27.2 billion — a portion that could grow dramatically in 2012.
Netflix, for one, has mentioned DirecTV as a model as it incurs greater-than-expected time and cost to itself expand into Latin America.
“If you look at DirecTV, it took them a number of years to gain their market position, and now they have an extremely valuable franchise,” noted Netflix CEO Reed Hastings during his company’s fourth-quarter earnings call in January.
Still, the investment community seems unimpressed by DirecTV’s huge subscriber gains in a sprawling, diversified region that is economically underdeveloped in many areas.
“DirecTV’s Latin American businesses are subject to significant macroeconomic risks,” warned Sanford Bernstein cable and satellite analyst Craig Moffett in a letter to investors Tuesday.
In late-day trading on the Nasdaq, DirecTV stock was only up about one tenth of 1 percent to $48.02.