DirecTV Launches Over-The-Top Streaming Service For U.S. Hispanic Consumers

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DirecTV (NASDAQ:DTV) has introduced a new Over-The-Top video service, Yaveo, aimed at the U.S. Hispanic consumers. [1]  The service is priced at $7.99 per month and will give the satellite company another targeted revenue stream. Yaveo will offer access to various movies, television shows and sports to its subscribers and it does not require a DirecTV pay-TV connection. It can be accessed at various devices including  desktops and iOS-  and Android-based devices. DirecTV is not alone foraying into this arena with Dish Network (NASDAQ:DISH) and HBO ready to launch their respective Over-The-Top services. On that note, we discuss below the development around this story.

See our complete analysis for DirecTV

Yaveo Will Boost DirecTV’s Revenues

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Yaveo is a Spanish-language Over-The-Top streaming entertainment service available only in the U.S. The digital service will offer access to programming from the U.S., Latin America and Spain. Customers will also have the ability to stream live sports and entertainment channels such as beIN Sports en Español, Cine Sony Television and ¡Hola! TV. [1] The company stated that the Yaveo technology is scalable and could be leveraged on other future initiatives. While DirecTV is targeting a niche market, it is not the only one to do so. Dish Network’s Dish World offers programming from India, China, Brazil and the Arab world to a niche set of consumers. [2]

We believe that the launch of streaming services is a smart move, which will aid DirecTV’s overall revenue growth. The U.S. Hispanic population stood around 54 million in 2013, which translates into a little over 20 million households (2.63 persons per household, the figure taken from U.S. Census Bureau). The estimated pay-TV penetration of 91% will translate into more than 18 million Hispanic pay-TV households. If DirecTV manages to capture even 30% of this market size, it will translate into annual revenues of over $500 million. If we assume an EBITDA margin of 20%, slightly higher than our estimated margins for Netflix’s (NASDAQ:NFLX) U.S. streaming service, it will translate into EBITDA north of $100 million. DirecTV can see better margins as compared to Netflix, which is focusing on bringing original content to its subscribers and the growing competition is bidding up content prices. However, given that the service is targeted for a niche market, Yaveo will have a little impact on DirecTV’s stock, as the company generates its value primarily from its satellite pay-TV services with EBITDA of over $8 billion in 2013, according to our estimates.

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Notes:
  1. DIRECTV Begins Soft-Launch of Yaveo™, a New Spanish-Language Over-The-Top Streaming Entertainment Experience, DirecTV’s Press Release, Dec 22, 2014 [] []
  2. DirecTV’s Spanish Streaming Service Is About More Than Telenovelas, Bloomberg Businessweek, Dec 22, 2014 []