DirecTV Launches Streaming App Update For iPad

DirecTV (NASDAQ:DTV) recently launched an upgrade for its iPad streaming app that now allows its subscribers to watch on-demand movies from premium movie channels such as HBO as well as DirecTV Audience Network anywhere. ^[1] This app allows more mobility and flexibility for Apple’s (NASDAQ:AAPL) iPad users who are also DirecTV subscribers. Mobility and flexibility are key aspects of customer satisfaction in this space, and something that Netflix (NASDAQ:NFLX) has leveraged well in the past.

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There are a few things to note about DirecTV’s update. Firstly, the app still does not allow users to watch live programming outside their homes, and the on-demand content does not include TV shows. Additionally, this is just a complimentary free service and perhaps not what DirecTV ultimately plans to launch for its long-term streaming strategy. As a result one could say that this is not a significant step by the company, as mobility and flexibility are still somewhat constrained, and the complimentary nature of the service means there is no direct financial gain.

The company’s longer term vision is likely to launch something similar to Netflix, or Comcast’s (NASDAQ:CMCSA) Xfinity Streampix. Assuming that it could develop such a product and charge a fee of about $5 per subscriber, it could enhance the company’s value by approximately 5%. This assumes that the penetration of the service in DirecTV’s subscriber base will reach approximately 50% by the end of our forecast period. However, while the current iteration is likely to improve customer satisfaction metrics it is unlikely to materially benefit the company’s earnings or valuation.

Our price estimate for DirecTV’s stock stands at $53, implying a premium of about 10% to the market price.

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1. DirecTV launches complimentary streaming video service on the iPad, Venture Beat, Mar 21 2012 [↩]