News Corp in 2005: Consolidating the DirecTV Acquisition
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After The Acquisition Contd...
Cable had an important advantage over satellite. Cable offered high-speed, two-way Net access, including phone capability. Satellite was still mostly a one-way service. But cable still needed millions of dollars of investments to upgrade to digital technology. About 40 million cable subscribers in 2005 did not have digital technology. Satellite, by default, was digital. This meant that cable companies such as Comcast, could only offer digital technology features such as electronic program guides and video-on-demand if they upgraded. By the end of 2004, both systems (satellite and cable) were engaged in intense competition to be big players in new consumer technologies such as the digital video recorder (DVR), high-definition TV, and a host of other products that were reshaping home entertainment. |
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After The Acquisition
Murdoch' s BSkyB had already redefined the way people watched television
programs in the UK, where the company controlled about 70% of the pay-TV market.
It had launched many innovative programs for the UK consumer, such as,
alternating camera angles to stay focused, switching off the sound and listening
to a different channel broadcast among others. With the help of DirecTV, Murdoch
planned to introduce these features in the much bigger US market.
After acquiring DirecTV, News Corp immediately restructured DirecTV and settled
labor disputes. News Corp dismantled everything at DirecTV that did not have
anything to do with satellite broadcasting. Half of the employees were
retrenched. Then, Murdoch sold DirecTV' s 80% stake in satellite-launch service
business PanAmSat to leverage buyout firm KKR for $2.5 billion. DirecTV' s
set-top-box manufacturing business was sold to Thomson. The company' s holdings
in XM Satellite Radio were sold for a pretax profit of $387 million. Murdoch
then spent about $1.4 billion to buy Pegasus Communications and the National
Rural Telecommunications Cooperative, both rural satellite companies with about
1.4 million subscribers combined.
DirecTV launched new satellites. Modeling itself on the success of BSkyB,
DirecTV announced it would introduce interactive television features to the
American audience. From a technology-driven company, DirecTV was becoming more
like a content-house, like the rest of News Corp. Carey commented ,
?#8364;œAt the end of the day, people buy DirecTV because they care about great
television" .
DirecTV was betting heavily on the popularity of football. Just as it did in the
UK, DirecTV finalized a five-year $3.5 billion deal with NFL Football Games for
broadcasting rights. This was a critical deal for DirecTV to keep cable
operators such as Comcast and Time Warner Cable out of the reach of football, a
popular game in the US.
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