Faced with a maturing market for satellite TV services in the U.S., DirecTV (NYSE:DTV - News) is pinning its future growth needs on the Latin American market. And on its Latin America Investor Day Thursday, the company outlined an ambitious agenda for doubling revenue in the region to more than $10 billion by 2017.
The company owns 100 percent of DirecTV Pan Americana, an operation with 4.1 million subscribers covering the West Coast of South America and including such countries as Columbia, Argentina, Venezuela, Chile and Ecuador. It’s a 93 percent stakeholder in SKY Brasil, which touts 3.8 million subscribers. And it owns 41 percent of SKY Mexico, which has another 4 million subscribers.
Bringing $5.1 billion in revenue in 2011, the entire Latin American region represents only a small portion of DirecTV’s $27.2 billion in total income, with the U.S. still supplying the lion’s share at $21.9 billion. But the LatAm revenue stream is growing, nearly doubling from $2.9 billion in 2009. Meanwhile, DirecTV added 590 million Latin American subscribers in the fourth quarter alone.
DirecTV’s infiltration into the region has provided enough of a model for other U.S. media companies that Netflix (NSDQ:NFLX - News) signaled it out as its poster child for its own expansion into the region during its fourth-quarter earnings report.
El Segundo, Calif.-based DirecTV sees key growth advantages in Latin America:
For one, the region does not have a lot of entrenched competition from technologically savvy cable companies, and DirecTV has an opportunity to be an industry leader in a pay TV industry that has room for development. In Brazil, for example, penetration of cable, satellite and telco TV is only around 22 percent. But with per-capita income rising—it was up 2 percent last year—the company projects the level of pay TV usage in the country to jump to 35 percent by 2015.
Another factor: Latin America also lacks what DirecTV officials call “programming choke points.” These include expensive carriage fees for regional sports channels, since many of region’s popular sporting events are on free-to-air television. The area is also free of broadcast network re-transmission negotiations.
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