News Corp in 2005: Consolidating the DirecTV Acquisition
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The DirecTV Deal Contd...
A DirecTV employee commented , |
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In 2004, News Corp launched various aggressive promotion campaigns. In an effort
to increase its reach, DirecTV dropped the price of its DVR. It also launched a
promotion that would give new customers a DirecTV set-top box for free.
According to analysts, DirecTV spent about $670 to acquire and keep a new
subscriber in 2002, while it spent about $758 in 2003 and $894 in 2004.
Operating profits fell from about $459 million in 2003 to about $54 million in
2004. Meanwhile, the churn rate (The rate at which customers leave each month)
was increasing. Compared to the monthly average of 1.5% in 2003, the rate
climbed to 1.7% in 2004.
Murdoch and Carey remained upbeat about DirecTV even as competition from cable
companies increased. Carey commented ,
â?#8218;??#8220;We' ve been helped by the fact that we are very focused on the television
experience. The cable companies are fighting the broadband battle and are much
more commoditized than television" .
But News Corp' s position had been weakened by some compromises made while
closing the DirecTV deal. The FCC had already banned large cable operators from
discriminating against rival programmers. So News Corp could not use to its
advantage the muscle power of DirecTV. News Corp also had to submit to
arbitration, if cable operators accused it of using its most popular channels as
bargaining tools. But these restrictions were temporary as they expired in six
years. By then News Corp would have about six million more subscribers according
to company projections. There was also nothing in law that could stop DirecTV
from collaborating with Fox Sports, another News Corp subsidiary, for content.
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