DirecTV Reports Its First Drop in U.S. Subscribers

By BRIAN STELTER

DirecTV on Thursday reported its first drop in net subscribers to its service in the United States, highlighting the challenges for pay television providers in a saturated marketplace.

The company reported that it more than made up for the decline by adding a record number of subscribers in Latin America. Over all, DirecTV reported a 1.4 percent increase in net income, to $711 million, or $1.09 a share, in the second quarter of the year, from $701 million, or 91 cents a share, in the same quarter last year.

Michael White, the chief executive of DirecTV, said in a statement that the growth in operating profit was “an early indication of successfully executing on our long-term strategy of striking a more optimal balance between growth and profitability.”

In recent months Mr. White has said that the company wants to focus on making more money from current subscribers in the United States, rather than on recruiti ng new ones. DirecTV is already the country's largest provider of satellite-television service, with nearly 20 million subscribers. It lost 52,000 net subscribers in the United States in the second quarter, after having gained 81,000 a quarter earlier.

Analysts had expected a subscriber loss, though they thought it would be somewhat smaller. They also expected DirecTV to increase the average amount of revenue per subscriber - and there, the company outperformed, with a year-over-year gain of 4 percent, to a total of $94.40 per subscriber per month.

DirecTV “appears to be benefiting from wise, economic consumer retention efforts - a long-term positive,” wrote Vijay Jayant of the ISI Group in a note to investors Thursday morning.

In Latin America, a much newer market, the company sacrificed gains in the average amount of revenue per subscriber to expand its base. In the second quarter, the company gained 645,000 net subscribers there, its best single-quar ter result ever, a reflection in part of cheaper rates for packages of TV channels. In his statement, Mr. White pointed to “20 percent revenue growth in the quarter” in the market.

DirecTV's headline-making spat with Viacom over a new contract for its cable channels was not a factor in the earnings because the contract did not expire until the end of the quarter. Viacom's channels were blacked out for more than a week in July, and it is unclear whether DirecTV's subscriber totals were affected by the absence. DirecTV, like other TV providers, has been trying to contain programming costs in recent years.