Satellite TV operator DIRECTV Group (NYSE: DTV) is turning a profitable corner right about now, and it's all thanks to a smart customer recruiting policy.

Where rival Dish Network (Nasdaq: DISH) is chasing customer growth through discount pricing plans, DirecTV asks for a stronger credit history and charges higher prices. The selling point is the company's large and growing number of high-definition channels. Cook those ingredients together and you get loyal, high-quality customers and high margins.

This quarter, DirecTV reported GAAP earnings of $0.32 per share, up from $0.27 a year ago. Revenue ballooned by 17% despite just about a 5% increase in customer count -- that's the magic of getting us to upgrade to high-def and DVR services. Monthly churn is down to 1.36%, a 10-year low that compares very nicely to other customer-centric subscription services:


Latest Subscriber Count (millions)

Monthly Churn (%)

Verizon (NYSE: VZ) Wireless






Netflix (Nasdaq: NFLX)



TiVo (Nasdaq: TIVO)



DirecTV has invested a lot in its HD infrastructure, and it looks like the strategy is paying off now. All those satellite launches and beefier set-top boxes that can handle more efficient video compression standards were necessary in order to fuel the current high-def revolution.

Competing with established TV service providers like Comcast (Nasdaq: CMCSA) while staving off newcomers such as Verizon's FiOS and AT&T (NYSE: T) U-verse is not easy, especially in a highly stressed overall economy. But it looks like DirecTV's high-margin, low-risk customer policy is working, turning yesterday's capital expenditures into the profits and cash flows of today -- and tomorrow.

Further Foolishness:

Netflix is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Anders Bylund is a Netflix shareholder and FiOS subscriber but holds no other position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure looks even better in 1080p high-def.