Bucking the Rise In Program Costs

DirecTV has been right on the front lines in the battle against rising programming costs, dropping The Weather Channel and declining to carry pricey sports channels like Pac 12 Network and, most recently, Time Warner Cable’s SportsNet LA, the home of the Los Angeles Dodgers Major League Baseball telecasts. Recently, TWC has stepped up its marketing efforts around opening day of the baseball season — which the Dodgers kicked off in Australia on March 22 — focusing on the availability of its RSNs in what some have said is a nose-thumbing to distributors who have declined to carry the channel. Multichannel News senior finance editor Mike Farrell recently spoke with DirecTV chief revenue and marketing officer Paul Guyardo about the importance of sports in DirecTV’s message, and how the largest satellite-TV service provider in the country reconciles that with its stance on keeping down costs. An edited transcript follows.

MCN: Time Warner Cable has been promoting the availability of its RSNs in its Los Angeles marketing efforts, an obvious snub to distributors that have failed to sign deals for the networks. How does that affect your message in that area?

Paul Guyardo: Sports leadership is an important component of what DirecTV is all about but honestly, our premium brand has always been more than just sports. It’s about our technological innovations and it also includes our superior customer service. I think that has been consistent in our message, certainly in the 8½ years that I’ve been here.

MCN: But how are you reacting in L.A.? Or are you reacting at all?

Guyardo: You mentioned that Time Warner Cable has been pushing the availability of their RSNs, and of course they are going to do that; they just overpaid $8 billion for the Dodgers. Regarding us, the majority of our marketing is on a national basis; even when we do local overlays, we wouldn’t emphasize an RSN because our research tells us that RSNs only really appeal to about 30% of our viewers.

MCN: Time Warner Cable’s L.A. marketing push could change if you sign a deal for the Dodgers network. Is that something that is still a possibility? The season opened March 22.

Guyardo: Of course we want our customers to have the Dodgers, but we’re not going to agree on a tax on all of our customers, particularly the ones that don’t watch the RSNs.

MCN: Sports is not the only thing that DirecTV has taken a hard line on — you dropped the Weather Channel earlier this year. And it seems like the industry has been moving away from the ‘We have more channels’ pitch for awhile, focusing more on quality than quantity. Is that the focus of your marketing efforts now?

Guyardo: I think quality over quantity has always been our message. If you go back and think about how we launched HD in 2007, we were talking about the quality of our HD channels, not the fact that you could watch needlepointing in HD, but the fact that you could watch CBS and NBC in HD. If you look at our TV Everywhere strategy, we don’t have the quantity of On Demand that some of our competitors do, but if you dig in, you’ll see that the quality of what we have is oftentimes superior. That is certainly the case with our pay-per-view movie business. We really focus on bringing consumers the movies they want to watch. Within my group we have a pricing and packaging group. With the incredible rise of sports costs and the fact that a lot of customers are no longer willing to pay those exorbitant costs anymore, we have introduced two new packages in the past two years. First we introduced, two years ago, the Entertainment Package, which includes ESPN and not the RSNs. Just this February we introduced a package called Select; that package also does not include the RSNs. It’s really about giving our customers — particularly the customers that don’t want to pay the higher fees, it’s about giving them more packaging choices.

MCN: Is that where you see the industry moving — tailoring packages to meet individual customer wants or needs?

Guyardo: It definitely works for us. I can’t say what works for [the rest of the industry].

MCN: But do you see DirecTV getting even deeper into specific niche packaging, or is this as far as you’re going to go

Guyardo: These two packages are only two years old, so part of it is to read and react accordingly. But I think we always have to be creative in the choice we provide our customers.

MCN: Do you even try to counter a competitor’s “We’ve got this channel and they don’t” message? Does that make a difference to you?

Guyardo: It really doesn’t. Where we really focused on our exclusivity is on something really big and differentiating as NFL Sunday Ticket. That’s when we will boldly come out and say, “Every Game. Every Sunday. Only on DirecTV.”

MCN: How important is that exclusivity to you? That deal expires soon.

Guyardo: There is one more season in the current contract. Consistent with what [DirecTV chairman and CEO] Mike [White] has said publicly, we’re very confident that we are going to get a new deal done.

MCN: And an exclusive deal?

Guyardo: Yes.