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DirecTV’s Double Take

New York— DirecTV Inc. plans to take two swings at delivering the kind of on-demand services that cable-television providers already offer their customers.

In a meeting with investors last week, the satellite provider said it’s preparing to launch two types of video-on-demand services: One available via satellite and a second, separate service delivered over high-speed Internet connections.

The No. 1 U.S. direct-broadcast satellite provider is trying to give its subscribers the ability to order programs they want, at the moment they want to see them. But unlike cable, the satellite broadcaster doesn’t have a two-way communications path that allows it to receive program instructions from customers. It can only send the programs to them.

“Clearly what the DBS operators are doing, in the case of on-demand and in the case of broadband, is playing catch-up,” said Bruce Leichtman, principal analyst for Leichtman Research Group Inc.

DirecTV’s satellite-delivered on-demand service, available some time “over the next few months,’’ will send preselected batches of programming to the hard drives of DirecTV digital recorders, officials said at the satellite provider’s meeting here for investors.

Content for the on-demand offering would be stored on a customer’s hard drive. In effect, DirecTV would fill a customer’s digital shelves with fare that can be pulled off, at any time.

But that method of on-demand delivery is limited by the capacity on the hard drive. In the fourth quarter, DirecTV plans to lift that lid, allowing customers to use a high-speed Internet connection to request titles from a library of thousands of movies and shows.

Customers can use their existing Internet connection — be it cable, digital subscriber line or dial up.

That will permit DirecTV to offer a sizable library of on-demand content, even without launching its own broadband service. The broadband VOD service, called “Direct Flix” on a slide during DirecTV’s presentation, is aimed at competing not just with cable on-demand programming, but home delivery DVD services like NetFlix.

“It does not appear that management is necessarily interested in becoming involved in the market for Internet access per se, but rather is primarily interested in the ways in which having broadband access can improve the company’s video offering,” Lehman Brothers analyst Vijay Jayant wrote in a report last week.

Roughly 5 million of DirecTV’s 15 million customers currently have some type of broadband service, the company told investors.

DirecTV’s broadband video-on-demand service, which will offer 2,000 titles at its launch, will be made possible with the introduction of high-definition versions of DirecTV set-top boxes with digital recorders.

The newer boxes, available later this year, tie together TV sets and high-speed Internet connections, according to Eric Shanks, executive vice president of DirecTV Entertainment.

“This will enable the viewer to download titles through their broadband connection right to their play list,” he said. “So with only a single headend for us to manage, unlike cable, we will have the technical capability to deliver the same volume — tens of thousands of titles, if they want them.”

DirecTV expects that it will have 300,000 boxes that can support this service deployed by the end of the year, Shanks said.

“Therein lies the challenge,” Leichtman noted. “It is limited by the box. The potential audience is not 15 million, the potential audience is far, far smaller than that.”

DirecTV’s broadband-video library will include cable TV shows, movies, premium service and nonlinear channel content.

Customers will be able to use the provider’s Web site (www.directv.com) or even their mobile phone to select titles and have them downloaded to their digital recorder.

“The possibilities will be virtually endless,” Shanks said.

DirecTV’s VOD service, which could be deployed as early as April, will include what it called “top-tier” fare from such major cable programmers as NBC Universal, premium-network content, airings of some FX shows 48 hours before they run on the cable network, movies, and customer-care information.

Initially, DirecTV will only be able to store 60 hours of VOD content in its new DVR set-tops now, leaving subscribers another 100 hours for their own recordings. But Shanks said capacity of the drive will be roughly doubled next year.