DirecTV Is Now John Malone's TV

With John Malone’s Liberty Media now its largest shareholder, DirecTV last week promised to keep focusing on video, particularly HDTV, as a weapon against cable’s bundle of TV, phone and Internet services — a triple play deemed invincible as recently as a year ago.

Just one day after Malone got his hands on the nation’s largest satellite operator, DirecTV told Wall Street analysts that video would still be king. Why not? DirecTV has become the arms leader in high-definition programming, counting 92 national networks in its arsenal against what it says are fewer than 30 in major markets from cable operators.

Now, DirecTV is launching a video-on-demand service with 3,000 titles and on-demand movies, as well. It’s ramping up its interactive sports offerings. It’s revamping its program guide, to better promote hidden content; improving its remote control; and allowing customers to pull up photos and music from personal computers and send HD programming back to those computers’ screens, anywhere in the home.

“We’ve built a real position of leadership in HD, and a real position that [the company] has more room to take advantage of,” DirecTV CEO Chase Carey said at his company’s Investors Day gathering in New York last week.

Cable operators assert that DirecTV’s high-definition advantage will be short-lived. They plan to free up capacity as needed for HDTV programming, through such technical fixes as switched digital video. Comcast also is touting its Project Infinity, which aims to have 1,000 HD “choices” by the end of the year.

But Carey claimed DirecTV can continue to reap the rewards of its aggressive strategy for years to come. DirecTV already has HD expansion in the works: plans are to add capacity for as many as 150 national HD services by year-end.


The $64,000 question last week, though, was how Malone — once the chief of then-No. 1 cable operator Tele-Communications Inc. and now chairman of Liberty Media — will put his stamp on DirecTV. A key question remains: How he might use it to leverage his own programming interests?

Liberty’s programming holdings include full or partial ownership in Discovery Communications, which includes Discovery Channel, Animal Planet and TLC; QVC; Starz Entertainment; and GSN.

Now that it has finally closed its $12 billion deal to swap its 16.3% of News Corp. for a 41% stake in DirecTV, Liberty also gets a trio of regional sports networks: FSN Rocky Mountain in Denver, FSN Pittsburgh and FSN Northwest in Seattle.

Carey downplayed the benefits of both making and distributing programming.

“Do I think there are synergies between content and distribution?” he said. “There are win-win opportunities. You can do things. Maybe you can launch channels, maybe you can just launch product extensions. You can use your distribution, I believe that’s true. That doesn’t mean, necessarily, you’re going to acquire content.”

But Carey said he expects to have a “more wide-ranging set of options” in the future under Liberty Media and Malone.

Under News Corp. and its chairman, Rupert Murdoch, consideration of its other media interests — from the Internet social site MySpace to the Fox broadcast and cable networks — played a role in shaping DirecTV’s strategy, according to Carey.

“I think they’ll [Liberty Media] look for us to be successful and pursue whatever paths we have to maximize our success,” he said. “Not that News Corp. wouldn’t want us to be successful, but they’d want us to pursue paths that fit within the other News Corp. businesses.”


Carey wouldn’t describe any new options or directions that DirecTV might pursue under Liberty and Malone. But Jimmy Schaeffler, a consultant to direct-broadcast satellite providers, said to watch what happens in new-media venues, for instance. Already, DirecTV is allowing hard-core football fans to bring its “NFL Sunday Ticket” out-of-market package right into league stadiums, using a rented handheld device.

“One thing they would do is come up with some further and really creative ideas to move content to new platforms to create new content,” said Schaeffler, CEO of The Carmel Group. “Those two would be the key mission statements under the Starz/Liberty umbrella.”

Like DirecTV, No. 2 U.S. satellite provider Dish Network last week voiced its intention to step up its HDTV offerings. The move comes as cable operators still have relatively thin lineups of 24/7 HDTV networks.

And the stratagem seems to be succeeding, even against cable’s triple play. Although Dish performed below expectations during the fourth quarter, it still gained 85,000 subscribers, ending the year at 13.8 million homes. DirecTV gained 275,000, ending last year at 16.8 million homes. Publicly traded cable operators lost about 500,000 subscribers for the year.

“We did well with positive subscribers, vis a vis the cable industry, that came in with negative numbers,” said Dish CEO Charlie Ergen.

DirecTV is now the second biggest pay TV distributor; Dish is No. 3. Comcast is the largest, with Time Warner Cable ranking No. 4.

“We will compete with the bundle, but … the recent results are probably pretty good proof that we’re competing pretty well,” Carey said at Investors Day.

He cited one key stat: Over half of DirecTV’s customers subscribe not just to its video services, but to an Internet-access service as well.

Both Carey and Ergen said they would continue to partner with telcos and outfits like WildBlue Communications and Clearwire Communications to provide their subscribers with a way to get the triple play.


It’s the Internet play that matters. Without it, neither DirecTV nor Dish can offer video-on-demand to their subscribers. Both satellite providers are downloading on-demand content to their subscribers’ digital video recorders through high-speed data connections.

Cable pooh-poohs this offering as just “pseudo-VOD,” inferior to cable. But Ergen last week argued that his method will give subscribers access to more content, since programming is drawn from the Web rather than from a specific file server.

And at its Investors Day, DirecTV noted that its subscribers can choose “10 titles or 100” to download ahead of time, which makes playback instantaneous.

“If you look at the total landscape, satellite is going to stack up pretty well on a video-on-demand basis,” Ergen said. “We actually have an unlimited VOD play.”

DirecTV has been testing DirecTV On Demand since last October, with more than 60 programmers and 3,000 titles available for free to any subscriber with an HD DVR, said DirecTV Entertainment executive vice president Eric Shanks.

By the end of the second quarter, the DBS provider will launch DirecTV Movies Now, in which popular titles are “pushed” to DVRs for instant on-demand viewing.

What will Malone TV have more of? In an October interview with Multichannel News, Malone expressed enthusiasm for more sports programming. The deal with News Corp. gives him three regional sports channels.

Several cable-network officials expressed skepticism about Malone’s long-term intentions.

“You can make the case that, like everything else with John Malone, these are simply assets on the balance sheet and a couple of chips on the bargaining table that he can horse trade down the road for something else,” one network executive said.

Tom Steinert-Threlkeld and Mike Farrell contributed to this story.