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DIRECTV Targeting Consumer Big Spenders

Kagan Research reports that Rupert Murdoch's overhaul of DIRECTV is now being put to the test. And the verdict is -- so far, so good.

The $12.2 billion-revenue DTH platform with 15.1 million U.S. subscribers expects a package of enhanced services will more than double to a lofty 47+ percent penetration rate of its subs by end 2007.

The enhanced services include high definition (DIRECTV aims to offer local HDTV channels to 76 percent of the U.S. by end 2006) and digital video recorders. DIRECTV told an investors' conference last month its goal is to corral more of the 33 percent of top-tier customers who represent 63 percent of profit potential.

"DIRECTV is foregoing some growth to get more high quality subscribers," says Kagan Research associate analyst Christy Rickard. That strategy is designed to raise average revenue per unit (ARPU), reduce subscriber churn and hold the line on subscriber acquisition costs (SAC).

Murdoch's News Corp. acquired a controlling 34 percent stake in DIRECTV's parent in late 2003, and is applying its expertise gleaned from operating other DTH platforms: BSkyB in the UK, STAR TV across Asia and Sky Italia.

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