DIRECTV Lower cable costs predicted in Murdoch takeover
Murdoch could use DirecTV to launch interactive services in this country.
LAS VEGAS (AP) -- Rupert Murdoch's takeover of the nation's largest satellite television provider could become a platform to launch and sell new Fox channels, while restraining cable costs, industry analysts predicted.
Murdoch's News Corp. agreed to acquire control of Hughes Electronics Corp., DirecTV's parent, in a $6.6 billion cash and stock deal announced Wednesday. Murdoch would transfer control of DirecTV to his Fox Entertainment Group subsidiary, which includes the Fox News Channel.
Consumers are unlikely to see any impact soon, especially since the deal, if approved by regulators, won't close until the end of the year. And Murdoch said Thursday that substantial changes to DirecTV will probably not show up until 2005.
But DirecTV's 11 million subscribers will give News Corp. leverage negotiating with program producers such as The Walt Disney Co. and AOL Time Warner Inc., who want cable systems to pay more for airing their popular channels.
"The leverage will keep prices down or give them some added profitability so they don't have to raise prices as much," predicted Steve Mather, an analyst with Sanders Morris Harris. "As an industry, distributors are growing their ability to fight back against increasing programming costs."
Fighting fee increases
DirecTV, its rival Dish Network, and cable companies have been fighting increases sought for channels such as Disney's ESPN and AOL Time Warner's CNN. Now that he has his own distribution outlet, Murdoch can use the leverage he has with his own popular networks, such as Fox News, to negotiate better deals for DirecTV.
Analysts praised Murdoch's pledge to add 1 million subscribers a year to DirecTV and boost profits. But investors have disapproved of some aspects, such as having Fox house the satellite TV system. Analysts said that will dilute Fox earnings because of Hughes' losses from its Latin American operations. The deal also adds $4.5 billion to Fox's debt load.
Investors displeased by the deal's structure sold off both companies Thursday. Fox shares plunged more than 17 percent, while shares of Hughes Electronics, which runs DirecTV, were down nearly 10 percent.
Murdoch, who already runs satellite television services in Britain, Australia, Asia and Italy, could also use DirecTV to launch the kind of interactive television offerings that have found a home among Europeans, but so far haven't found a U.S. audience.
Available in Britain
In Britain, Murdoch's 6.1 million Sky Digital subscribers can choose from eight camera angles while watching live broadcasts of soccer matches, shop using the remote control and bet on horse races. New remote controls include keypads for text messaging, and new set-top boxes include personal video recorders to pause live television and record programs on a computer disk. The boxes can also serve as game consoles using wireless game pads.
Efforts to introduce similar services in the United States have failed miserably. DirecTV has more than 6 million set-top boxes able to support interactive television, but offerings have been slim.
Some analysts say Murdoch could use his expertise in marketing interactive services abroad to make them more popular here.
"Murdoch is the most enthusiastic supporter of interactive television on the face of the Earth," said Phillip Swann, president and publisher of Tvpredictions.com. "Unlike wide-eyed advocates who want to sell pizzas and Jennifer Aniston sweaters, Murdoch knows that ITV must be simple and it works best when it appeals to base desires."