Netflix Isn't Killing DIRECTV

Shares of satellite TV operator DIRECTV (Nasdaq: DTV  ) are setting 52-week highs today on the heels of an impressive fourth-quarter report. Actually, check that: DIRECTV shares have never been this expensive in the company's decade and a half on the public markets.

The company signed up 289,000 net new American subscribers during the quarter and another 378,000 in Latin America. DIRECTV's single-minded focus on high-quality customers who want top-shelf programming packages and are less likely to cancel their service is paying off in spades as the company continues to grow while cable operators from Comcast (Nasdaq: CMCSA  ) to Time Warner Cable (NYSE: TWC  ) are losing their iron grip on consumers.

That's why monthly customer churn is a low 1.44% this quarter, compared to sitting above 1.5% for the past two fiscal years. That's despite DIRECTV raising prices and moving customers into more lucrative channel packages. Very impressive.

All told, fourth-quarter revenue grew by 11% to $6.6 billion and the bottom line jumped from a small loss last year to a $0.74 GAAP profit per share this time.

DIRECTV's focus on high-paying customers is making it feel like a premium provider, almost a status symbol. That's an important ingredient in the Apple recipe for success, and DIRECTV is smart to copy it. That's how you get committed customers, bordering on obsessed. The theme song for this demographic focus would be either "Losing My Religion" or "Every Breath You Take" -- pick your favorite stalker anthem.

Some consumers (myself included) may be cutting the cord on TV services and making the jump into a fully digitized infotainment era powered by Hulu and Netflix (Nasdaq: NFLX  ) , but we're obviously not hurting DIRECTV any. Besides the high-quality customer focus, growing into new markets such as rural America or DIRECTV's Latin American ambitions is easier and cheaper when you can just send in an installation crew with a dish and be done with it; if you don't have a cable feed by now, you probably never will.

Dish Network (Nasdaq: DISH  ) will probably sing a very different tune in its own report tomorrow, unless I'm wrong about the value of DIRECTV's customer quality.

Interested in more information on broadcast services? Add DIRECTV, Dish, Comcast, and Time Warner Cable to your Foolish watchlist.

Fool contributor Anders Bylund owns shares of Netflix, but holds no other position in any of the companies discussed here. Apple and Netflix are Motley Fool Stock Advisor picks. The Fool has written puts on Apple. The Fool owns shares of Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


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