DirecTV Announces Rate Hike

Like its rival direct-broadcast satellite provider, DirecTV Inc. is raising its prices this year, rolling out an average 4% rate increase effective March 1.

DirecTV, the nation’s largest DBS provider, notified its retailers this past Friday of the rate increase, which will be as much as 8.7% for its lowest-priced tier, according to a report released Tuesday by Craig Moffett, an analyst at Sanford C. Bernstein & Co.

The second-largest DBS company, EchoStar Communications Corp., has already said that it is raising rates an average of 4% this year.

DirecTV blamed its price hike on rising expenses for programming.

“Escalating programming fees continue to be the primary culprit for price increases,” spokesman Robert Mercer said. “These fees have significantly outpaced the average increase of a DirecTV customer’s bill, which will be slightly greater than 4%.”

The DBS provider also maintained that even with its “modest” increase, DirecTV service still has a “sizable price/value advantage over cable,” the average annual price increases for which have been higher, according to Mercer.

Moffett’s report offered an analysis of DirecTV’s price hike.

“As has been the case with increases recently announced by EchoStar and Comcast [Corp.], the increases are largest [on a percentage basis] for introductory packages and smaller for high-end packages,” he wrote. “In a surprise, however, prices under DirecTV’s plan will increase more for new subscribers than they will for existing ones.”

That strategy “appears to be a clear indication that, at this point, churn management is a higher priority than is new subscriber growth,” Moffett added.

For new subscribers, the price for DirecTV’s introductory “Total Choice” package will increase by $3 per month, or 7.1%, from $41.99 to $44.99, according to Moffett. The “Total Choice Plus” package will rise by $4, or 8.7%, from $45.99 to $49.99.

But existing DirecTV customers will face only a $3 price increase across all packages, or an average increase of 4.5%, Moffett said. For example, for current subscribers to the Total Choice Plus package, the price increase will be 6.5%, from $45.99 to $48.99.

DirecTV said spending on new services like HDTV also helps to justify its rate increase.

“We’ve continued to make significant investments in the quality of the DirecTV viewing experience, launching new satellites [three last year] to bring local stations to more than 93% of the country, including local HD channels and original programming,” Mercer said.