At DirecTV The Sky's the Limit

David Hill's office perch overlooking the runways of Los Angeles International Airport is particularly apt. Hill has had a sort of air-traffic controller's career at News Corp., helping fledgling projects get off the ground and guiding struggling businesses to safety.

Currently on his radar: DirecTV, where he's entertainment president, and Fox Sports Television Group, where he's chairman/CEO. The gregarious Hill was named to the DirecTV post last spring, and it is his primary responsibility.

Working under DirecTV President/CEO Chase Carey, Hill is in charge of revving up DirecTV's subscriber base (currently about 15 million), overseeing programming, integrating new technology, and, in general, helping DirecTV as it battles the limitations of satellite-TV technology while cable races ahead to offer video-on-demand, phone service and other enticements.

But the cable business is more spooked than ever by satellite's appeal to consumers, and Hill—the man who launched BSkyB satellite service in the UK, started Fox Sports in 1993 and revived a struggling Fox Television in the late '90s—is accustomed to challenges. Last week, he spoke with B&C's Ben Grossman.

How's the job going so far?

I wasn't doing back-flips when I got asked to come here, and, to a certain extent, it parallels what happened when I got asked to go to the [Fox TV] network. I wasn't doing back-flips then either. But once you got into it, it was fascinating. I have felt for a while that linear TV was dying because of the last 10 years and all the entertainment variables that are available to a consumer. In fact, if you really analyze it, linear TV started to die when the remote control was invented.

Interactive television has found success elsewhere, such as at one of your former posts, BSkyB. But will it penetrate the U.S. market?

I left Sky just as we were starting to think about what interactivity was. What's happened is that the TV experience is mirrored with growth of the Internet, with information always available—messaging and everything. Television as a one-way street is losing its appeal. There is a generation now that is used to having anything they want when they want it. We haven't even started thinking about the applications of interactivity for entertainment.

But take scripted dramas, for instance. You could have a multiplicity of things that you can put into a viewer's home that are all connected to one event.

Where are the company's most promising areas of opportunity?

The growth of video-on-demand and what pay-per-view means. Look at the bold move made by [Cablevision's] Dolans in starting Mag Rack [an on-demand service]. It was a great idea. Just as their parents learned to pay $5 for a specialty magazine, in 10-15 years I can see this generation paying a buck to watch “telezines” that are of their special interests and aren't free or ad-supported.

Like all pioneers, we'll make some bad calls, but if we get a few right, it will be a great thing. Our service will be so much more than just a straight sell-through of existing channels. It's hard to put it into a cohesive sentence today because how do you describe, in a sentence, the Wild West?

You recently announced plans to launch your first original program, a remake of a British music show, which you are calling CD USA. Why music for your first outing?

It doesn't make any sense to do something that is already there. For instance, we wouldn't start a news service. We had Freeview, an ad hoc, eclectic group of concerts. I looked at the numbers, and they were impressive, even though there was never any marketing for them.

Where is the only time you can see back-to-back live performances? Only on the Grammys or award shows like that. I've been in this business so long and had my heart broken so many times about shows I thought were going to work that didn't. But I think this will resonate with the public.

What's the next step? Original scripted entertainment?

I'd like to go scripted. For instance, I think there is a huge appetite for historic drama in this country. I think HBO's Rome is sensational. I'd like to do a home-grown, 22-episode history of the South or get inside someone's head about the Civil War, tell the story of a Civil War battle.

But is DirecTV ready to make that kind of investment?

We have to. The public is so sophisticated, you have to have the very best in terms of writers and producers and directors, and I've talked to a number of the best writers, producers and directors in the world and said, “If you have a big, scary, dangerous idea for which the hallmarks are quality and family viewing, come and see us.” I'd have to have long talks with Chase Carey to see if it was worthwhile strategically. But if you look at our platforms around the world, we are not alone; we are all over the world. Maybe it could be a News Corp. platform play for a huge, bold, family-oriented historical program.

But would a successful producer or director actually take on a project like that if it were for DirecTV?

Of the people I have spoken to, no one has laughed in my face and said get out of here, so that's a start. I can't expect people like the Brian Grazers or the Tom Hanks of the world to come out and say, “I have this great idea, and I thought of DirecTV.” It's like starting a talk show: You don't get A-list guests until you get established.

How else can DirecTV differentiate itself from other content-delivery outlets?

Getting to the point where the customer sits down in front of their DirecTV system and whatever they want is right there in front of them. But just as important is something easy to forget about: service. We are spending a lot of money, continually overhauling installation and service. We can't break down; we always have to be cognizant of that. And whatever new comes along, we must be ready to react. It's a part of developing the technology to make the customer experience better all around.

Speaking of technology, tell us about the recent deal with NBC Universal that will let DirecTV customers watch new shows for 99¢.

It's a very basic and simple arrangement. It's good for us because it gives us more to offer a viewer, and it works for the network because it gives the public more of a chance to sample a show. For the networks, it's not just dual revenue, it's another chance to get their shows noticed.

The NBC U deal is for five shows to be available on DirecTV at a time. Will there be friction over which ones to offer? NBC U may want to showcase less successful shows to give them a boost, but DirecTV obviously would want the best stuff.

Sure, there will be friction, but NBC makes the decision on the shows. In any of these things, there will always be, shall we say, spirited conversations. And I would do the same thing if I were NBC. But if they are smart, they should mix the top-rated ones and some they are trying to get off the ground.

Any other partnerships on the horizon?

We're talking to the people at Sundance. Independent films in coming years will go through a huge boom, and I also think documentaries will. We might establish in our pay-per-view section, a week after the Sundance festival, a group of all the award winners, and it would cost people 99¢ to look at it.

From a business standpoint, building average revenue per customer is crucial. What else can you do on that front?

Put on more programming that you will want to pay for, but we need to balance out stuff we charge you for and stuff we give you for free, so you don't feel you are always getting gouged. The deal we have with XM Radio to stream their stations will give customers more. And we will be announcing soon that we are stepping up our concert series next year with 52 live shows.

What other new channels are coming down the pipe?

We want to keep doing things that aren't available on TV now. For one, “sound-effect–machine noise” will be a new channel. I was reading Sky Mall on a plane one day and saw one of those sound-machine alarm clocks. I thought, “People are paying 300 bucks for this?” So I just asked our people if we can do that. We'll soon be offering a couple of channels to pick between—rain or whatever—when you go to sleep. Some of the shit we are talking about is so off the wall.