Murdoch's 21-Year Quest

Maybe the lesson from Rupert Murdoch's long attempt to control a U.S. satellite-TV company: Forget about partners.

Murdoch began his attempt to build a U.S. satellite empire in 1983, when he tried to launch Skybrand, a satellite TV company that was to offer rural consumers five whole channels.

That first effort failed quickly because the company couldn't acquire programming cheaply enough, and the British press wrote off the U.S. TV business as too tough to enter. (Meanwhile, in 1983, Murdoch's NewsCorp acquired a majority interest in a small British pay-TV offering that is now BSkyB, its most successful and innovative satellite TV company.)

In 1990, News Corp. entered a $1 billion partnership with General Motors' Hughes Corp., General Electric's NBC and Cablevision to launch SkyCable. The venture intended to offer customers 108 channels via satellite. But it wasn't long before squabbling broke the partnership up, and it was back to the drawing board.

Murdoch's attempt, in 1995, to build his own satellite-TV company called American Sky Broadcasting, or ASkyB for short, looked bona fide. He hooked up with MCI WorldCom, agreeing to pay half the $682.5 million to acquire one of the few satellite slots that could cover the entire continental U.S. (shortened to CONUS).

In return, MCI WorldCom was expected to pony up $2 billion to get a 13% stake in News Corp. and a seat on the company's board of directors. But it quickly became clear that News Corp. had no intention of letting MCI have management input in either company, and the relationship fell apart.

In 1997, News Corp tried to combine ASkyB with Charlie Ergen's upstart satellite-TV interest, EchoStar Communications Corp.

Even though DBS was hardly competitive with cable at that point, the combination was labeled “Deathstar” by cable operators, because it would have joined together two powerful forces. It didn't happen. Ergen and Murdoch did not get along, and the two moguls parted company as bitter rivals.

Looking for a partner who was less interested in running the company, Murdoch attempted to sell his assets to cable-backed satellite-TV company Primestar for $1.7 billion. The Justice Department blocked the deal, citing concerns about allowing companies that owned cable networks to also own DBS distribution platforms.

With nowhere else to turn, Murdoch ended up having to swallow a bitter pill, finally selling the ASkyB assets to EchoStar in 1998 for $1.1 billion in cash and stock. As part of that deal, EchoStar dropped a $5 billion breach-of-contract suit it had filed against News Corp. when Murdoch pulled the plug on the partnership.

Murdoch took a little break from the wild and woolly U.S. satellite industry while he waited for the regulatory and market environment to catch up with his ambitions.

Overseas, in 1998, he acquired an 80% interest in a company called Stream International, now Sky Italia, for $118.8 million.

News Corp. today owns 100% of that company, one of two satellite-TV operations it has whole ownership of. The other is Asia's Star TV.

Murdoch became interested in the United States again when General Motors put DirecTV on the block in 2000. He endured grueling negotiations with the company for 18 months.

But General Motors wanted more cash than News Corp. was willing to give, and Ergen saw yet another opportunity to thwart his rival. Surprising everyone by raising enough capital, EchoStar won a $26 billion bid for the company on Oct. 27, 2001. It simply had to convince the government that the merger of the country's only remaining satellite TV players wasn't anti-competitive.

But Murdoch didn't intend to let Ergen walk away with his prize. He assigned his lobbyists to walk the halls of Congress and the FCC until the deal—given only a 35% chance of success in the first place—was dead.

In December 2002, the Justice Department ruled that an EchoStar-DirecTV combination would be anti-competitive.

Four months later, on April 9, 2003, GM accepted News Corp.'s offer to buy a 34% controlling stake in Hughes Electronics, DirecTV's parent. In the end, Murdoch had his U.S. satellite company, finally sealing the DirecTV deal last January.

It had taken him only 21 years.