DirecTV (NASDAQ:DTV) recently decided to cut programming for one of its 3D channels from 24-hour programming to part-time special events.  The move shows that the hype for 3D programming among customers was overdone, something that we voiced earlier as well (see Will 3D TV Be As Successful As the 3D Box Office?). While 3D movies may have been successful at box office, that does not guarantee the success of 3D programming on pay-TV without several modifications necessary to reduce inconvenience and potential health hazards.
DirecTV has led 3D programming on pay-TV. While that puts it ahead of its competitors, the incremental benefit is minimal given the low demand and availability of 3D programming on television. We estimate that advanced services (HD & DVR) constitute about 15% to DirecTV’s stock.
However, this value is based on more than 50% penetration of these services in the U.S. subscriber base as of 2011, and the expectation that this penetration will rise close to 80% by the end of Trefis forecast period. 3D programming is nowhere near that and, given the slow sales of 3D TV sets, the penetration increase is unlikely to rise significantly in our view to be a notable value contributor for DirecTV.
Our price estimate for DirecTV stands at about $54.50, implying a premium of about 15% to the market price.Notes:
- DirecTV Downgrades Its 3D Channel To Part-Time Status, MultiChannel News, June 22 2012 [↩]