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White Knight

Michael White burst on the media scene in January, when he
left a top management position at PepsiCo — he was CEO of
PepsiCo International and vice chairman of PepsiCo — to head
up the largest U.S. satellite-TV provider, DirecTV. An accomplished
pianist (a director of Whirlpool, he has been known to
play at board events) with a reputation as a brilliant manager
and marketer — he impressed then-DirecTV chairman John
Malone by learning to speak Russian for Pepsi’s launch into
that market — White is a relative unknown in the media landscape.
That could be changing.

White has spent the last seven months immersing himself in
the business by sitting in on customer installations, pulling shifts
at call centers and hobnobbing with DirecTV’s technology staff .
He joins the satellite giant as it reaches a crossroads: the business
is maturing and subscriber growth is slowing — net new
subscriber additions in the first quarter 2010 were 100,000 vs.
460,000 in first-quarter 2009.

DirecTV, like its distribution peers, is seeking ways to extract
more revenue from existing services, add new products and form
new alliances to drive growth. White spoke with Multichannel
senior finance editor Mike Farrell in mid-July about these
and other issues.

MCN: You’ve been on the job a little more than
six months. Is it different than you expected?

Mike White:
It’s going very well. I inherited
a terrific brand, we’ve got a great service and
product and I’ve got a terrific team.

Not having been from the industry, I didn’t come
in with a huge number of expectations in the first
place. But I would say a number of things struck me that perhaps I didn’t
fully appreciate. One is how intricate and interconnected and interdependent
our business model is, both internally and externally.

Our industry touches so many topical things these days. When I was in
PepsiCo, if I opened The Wall Street Journal, there might have been an article
about Coke or an article about obesity or an article about Nestlé that
I would take a look at. Here, I’m looking at everything from articles about
digital media and Apple or Google or Netflix to articles about our program
providers, CBS or NBC or the NFL and sports or Major League Baseball
or the NBA and what’s happening there, as well as what’s happening in
Washington, D.C., with the Federal Communications Commission as well
as what’s happening, finally, with our traditional competitors. So, you find
the industry is really right at the heart of a lot of changes that are going on
in our society, which is exciting but also can be challenging, as well.

MCN: When you started, it was just around the time that the new
subscriber-growth trajectory for DirecTV was beginning to slow
down. Is your focus on getting those numbers back up?

Anytime you look at a business that was performing at a certain
level, you have to go back and figure out what was driving it, and then
you have to look at what’s appropriate for today and tomorrow. To be
honest with you, we had a big, big impact from both the analog-todigital
conversion, as well as some of the initial work we did with
our telco partners last year. That’s not a normal level. So I’m quite
pleased with our subscriber-acquisition numbers this year.

MCN: You’re offering about 200 HD channels, you’re rolling out allhome
DVRs and you’ve just launched a 3D channel. What’s left?

I think we’re just scratching the surface on 3D. That’s just beginning,
really, and I think that will continue to grow in the years ahead,
but it’s in its infancy right now. That’s not to say I think it’s the same as
HD — I don’t believe it is — but I certainly think that’s an opportunity.

Second, for us in the satellite business, connecting the box opens up
a world of opportunities for us to tap content from the Web. And I think
that’s certainly an area that, as we look at other TV apps, if we look at
anywhere-and-anytime video opportunities for our customers, movies
in particular are a big opportunity for DirecTV.

MCN: When you say content on the Web, is that YouTube-like
content, or content from broadcasters and cable programmers?

MW: All of the above. As media consumption has fragmented over
the last 10 years, there are going to be a number of areas that consumers
will want to access. We are already going to be streaming
[the NFL] Sunday Ticket [out-of-market package] on an iPad for subscribers
that take that package this fall. [We’re] looking at ways that we can expand [content] that’s
available by either authenticating
deals that we’ve done, and we’re
trialing some things with a couple
of our programming partners. I
think that will evolve as well.

MCN: You mentioned authentication.
How are you moving
along on that front?

I’ve spent time with all of
our program partners and each
of them has a slightly different
take on it, but I think everyone
recognizes that we want to provide
more convenience to our
consumers in the way they can
consume the content, but we
want to ensure that we don’t
undermine the business model
that creates the economics for
us to create great content and,
frankly, for us to be able to distribute
it. And so it’s finding the
balance between those two.

I certainly don’t believe that in
this day and age you can restrict a
consumer to only watching 60 Minutes
at 7 o’clock on Sunday night.
You need to think differently, and
frankly that’s why we’re investing in
twice the capacity to record in our
DVRs than our competition has.
We’re going to continue to raise the
bar around just what you can DVR
through Direct TV and how you access
that alone, in addition to other
vehicles like authentication.

I think everyone is playing with
a variety of different models. And
we want to be active partners with
our programmers as we do it.

MCN: How are the programmers
reacting to this? Are they willing
to step up to the table on authentication,
or are they trying
to hold back some programming
for their own use online?

I don’t think you can generalize.
What I can tell you is that
we’ve had very constructive discussions
with a number of our
programming partners about
ways to authenticate through
multiple vehicles. As I said, right
now we’ve got some trials going
with Turner on TBS and TNT.
com, as well as with

We’re having conversations with
all of our programming partners
about having a multidimensional
strategy for serving the needs of
our consumers when and where
they want to consume the content
without undermining the
basic economic model that is, as
I said, is really what has enabled
us in this country to have far and
away the most channels with the
most variety and the best content
far and away in the world. Most
other countries, you’re lucky if
you get 30 channels.

MCN: Is authentication a big
component of carriage negotiations
as they go forward? I
know with the cable operators it
seems to be.

I can certainly tell you from
our standpoint, all of our discussions
have an element of discussing
the digital rights and authentication
as an element in our
conversations with our partners.

MCN: On your first-quarter
conference call, you talked
about new products that could
potentially increase subscriber
growth and average revenue
per unit, as well as reduce churn.
Can you elaborate?

You’ve seen the launch of
multiroom viewing; we’re very
excited about that. We’re seeing
terrific take rates continuing on
our advanced products. Later
this summer, we’re relaunching
DirecTV Cinema; we’re very excited
about that.

Historically, we had a very limited
offering in terms of the number
of pay-per-view movies that
we could offer our customers.
We’re about to explode the variety
that we can offer our customers
later on this summer by a
factor of 10 or more. We’re going
to go from less than 20 [movies]
to 400-plus. As we evolve towards
connecting the box to the Internet,
it enables us to go to thousands
and thousands.

I think the other big opportunity
for us is advertising. Interactive
and locally addressable advertising
we think is a big opportunity
for us.

MCN: So, no plans for a broadband

We certainly think that
providing broadband to our customers
through some kind of
bundle is an important strategy
for us, but we’ve been doing it by
partnering up with a number of
diff erent telcos. Frankly, we have
enough telco partnerships that
we should be able to reach 90%
of the entire U.S. with broadband
bundles. And we’re going
to continue to look for ways to do
that more smoothly and to provide
even more robust bundled
offerings. I see us more as the
aggregator working with other
partners on broadband than us
literally providing the wires or
the network.

MCN: One thing I wanted
to touch on is the changing
relationship with Liberty Media.
Basically what is your relationship
with Liberty right now?

We do not have a business
relationship of any kind with
Liberty. Once the spinoff was
completed last fall, Liberty as an
entity has no ownership stake
with us. I know [Liberty Global
CEO] Mike Fries and have a
good relationship with Mike and
I know Liberty Media CEO Greg
Maff ei quite well. [But] there’s
no commercial relationship.

My relationship personally,
as well as our relationship as
a company, is with [Liberty Media
chairman] John Malone. John
and his family own [about] 3.5%
of the company. He’s a significant
shareholder; he’s also a valued
adviser. He was on the search
committee that hired me; he’s
been a terrific mentor and friend
to me personally.

I was with John last week in Sun
Valley [at the Allen & Co. conference]
and had a few minutes with
him and continued to tap John’s
advice and counsel. He’s a significant shareholder and he’s a friend
and a mentor.

MCN: When Liberty restructured
its relationship with DirecTV in
2009, there was a lot of speculation
that there was going to be
a sale. That hasn’t come to fruition,
but is there any scenario
where a sale of DirecTV would
be feasible?

I never comment on rumors.
I can only tell you, our
focus is on putting a strategy together
for the future of this company.
I don’t think selling your
company is a strategy, candidly.
But we’re very excited about our
opportunities that we see with
our company and what we think
we can do on our own.

But, like any CEO, I work for
the shareholders and the board
of directors and that’s where that
is. But certainly from my standpoint,
my focus is on how do I deliver
the same kind of progress
strategically and fi nancially that
I inherited? This company has
had a terrific run over the last five
years or so, and it’s certainly my
job to help adapt to the new environment
that I see out there, the
changes that we all read about,
whether it’s over-the-top, whether
it’s digital media or whether
it’s programming costs or whether
it’s competition and a stressed
consumer, and ensure that we
can continue to be as successful
in the next five years as we were
in the last five years.

MCN: How important is your
relationship with the telcos? Is
that changing as they are trying
to do their own separate television

I think our relationship —
and I’ve personally spent a significant amount of time with all
of our telco partners, not just the
two large ones — that we have
an excellent relationship with all
of our telco partners, that we are
eager to expand our telco partnerships
beyond the existing
partners that we have, and [we]
hope to have some things to say
about that in the weeks ahead.

But it’s again one of those
unique aspects about our business
where you have these, I
guess people call them “frenemies,”
where you cooperate in
certain areas and you compete in
others. And that’s part of the ecosystem
that we all live in.

MCN: In the past, DirecTV’s
marketing message has been focused
more around product superiority
— most HD channels,
best sports, etc. But lately, price
competiveness has been creeping
into the message with more
discounting and an emphasis on
lower cost. Is this a reflection of
the times or a shift in how you’re
selling to consumers?

No, I think it’s certainly a
reflection of the times we’re in
and the industry. And we absolutely
are going to continue to
emphasize in our advertising
the distinct advantages that we
bring to the consumer from a
technology standpoint.

I think
you’ll see that both in our multiroom
viewing campaign, which
is on air right now, as well as in
our relaunch of movies later this
year. Make no mistake about it,
our strength is innovation and
differentiation of our product
and we intend to continue to do
I think what you have certainly
seen is that in an industry that
has become far more competitive
in the last 18 months and
in which at times we get singled
out, that we need to compete
and we intend to compete. And
in an economy where the consumer
is still pretty fragile and
has become more price-sensitive,
certainly, we need to kind
of recognize that our consumers
are more price-sensitive.