News Corp in 2005: Consolidating the DirecTV Acquisition
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The DirecTV Deal
?#8364;œDon' t worry. We don' t want to take over the world. We just want a piece of it." Murdoch
Television programs were delivered by cable or through satellite.
Satellite had much wider reach than cable. Cable operators beamed
programming content through cables to the subscribers' homes. In case of
Satellite television, satellites orbiting in the sky did the job,
without the need for any cable connection. |
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In 1990, after prolonged negotiations, BSB, a television channel, merged with
Sky, into a single company, British Sky Broadcasting (BSkyB). Between 1989 and
1992, the combined entity made losses of about $ 1.2 billion. As BSkyB
introduced better programs and aired soccer matches exclusively, it achieved a
turnaround by the end of 1992 and revenues rose to ?#8218;? 385 million.
By 1993, BSkyB reached financial stability. Over the next four years, the
company developed new content and innovative programs. By 1997, 25% of British
homes were subscribers to the channel. By 2001, Sky had 5 million customers and
had become the first digital television channel in the world by moving its
operations from analog to digital. By June 2002, BSkyB had 6.1 million
subscribers and a 20% increase in revenues over 2001.
Meanwhile, DirecTV had made significant progress with its direct broadcast
satellite services. Attractive sports content, aggressive marketing and free
installation resulted in rapid penetration of DirecTV. By 2000, DirecTV had
enrolled more than 9.5 million subscribers to become the largest satellite-based
provider of television content in the US. DirecTV offered more than 225
programming channels, to 60 million homes in about 40 cities in the US.
Murdoch realized DirecTV would add the strategic US market to his worldwide
network of satellite distribution that included BSkyB in Britain, Star TV in
Asia, Foxtel in Australia, SkyTel in Latin America, and Stream in Italy. DirecTV
would eliminate dependence on cable distribution in the US market and fortify
News Corp' s fast-growing cable networks, which included Fox News, Fox Sports,
National Geographic, and Speed Channel, which carried motor sports. DirecTV gave
Murdoch the missing link in News Corp' s worldwide satellite-distribution
system. As press reports put it, the DirecTV acquisition made Murdoch
?#8364;œa general in both the content and distribution camps" .
In September 2000, Murdoch offered $ 22 billion for a 35% stake in DirecTV. But negotiations between News Corp and DirecTV proceeded slowly. A 25% decline in the stock of Hughes Electronics in February 2001 slowed down the talks further. In April 2001, Murdoch reduced his bid for a 30% stake and got Microsoft to commit $3 billion in cash for the deal. In August 2001, EchoStar surprised everyone by announcing an unsolicited $32.3 billion bid for DirecTV. EchoStar and DirecTV together controlled about 92% of the US satellite pay-TV market. Murdoch lobbied intensely and succeeded in getting the merger blocked on antitrust grounds. Finally in April 2003, News Corp acquired GM' s 19.9% stake in Hughes and a further 14.1% from public shareholders and GM' s pension and other benefit plans.
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