Cable has historically been recession-proof, but, as DBS companies face their first bad economy, they may not be as charmed. DirecTV sliced its projection for subscriber growth, saying that it now expects to add 1.5 million to 1.7 million subscribers this year.
That's 15% to 25% fewer additions than the leading DBS service had projected just three months ago.
DirecTV faces increasingly successful counterattacks from cable operators, which have now widely deployed high-capacity digital cable packages that blunt DirecTV and EchoStar Communcations' chief advantage.
But Hughes executives primarily blame the slowing economy. DirecTV added 340,000 customers in the first quarter, bringing the total to 9.8 million. Hughes Senior Vice President Eddy Hartenstein says DirecTV should hit 11 million customers by year-end.
The slowdown comes as Hughes parent company General Motors is trying to figure out whether to sell or spin off the satellite unit. News Corp. Chairman Rupert Murdoch is renewing efforts to merge Hughes into his SkyGlobal international DBS operation, but GM executives are pondering whether they should sell in a down market or engineer some sort of spin-off that would give GM a few billion in cash for its 30% Hughes stake or unload a pile of debt on the spun-off company, which would be at least as good.
"It's not a good time to be showing weak numbers," said one securities analyst who would like to see the operation get sold to Murdoch.