Cable operators didn't need the FCC video competition report (B & C, Jan. 15) to know that satellite TV companies are a serious drag on growth. They have been feeling the impact of DirecTV and EchoStar on revenue and subscribership since those tiny dishes started popping up on rooftops seven years ago.
Today, DirecTV serves 9.5 million subscribers and expects to hit the 10-million mark this spring, while its scrappy rival, EchoStar, hovers around 5.5 million. Together, they account for more than 15% of all "multichannel" homes. According to the FCC report, consumers are now picking satellite over cable at a rate of three to one.
But that's not the bad news for cable. Here's the bad news: It could get worse, much worse, if Rupert Murdoch manages to pull together enough cash to buy DirecTV from General Motors for $40 billion.
If Murdoch gets a hold of DirecTV-and he seems determined-he will turn his broadcast and cable networks into one big marketing machine for the satellite service. You'll see the DirecTV brand everywhere you go in Murdoch Land-Fox, FX, Fox Family, Fox News Channel. You won't be able to escape it. You won't be able to resist it. In a decade, we'll all have Australian accents.
Every other pitch in the World Series-Fox has the TV rights for the next six years-will be followed by a pitch for a dish. Homer will try to install one himself to save a few bucks (Doh!). Bill O'Reilly will badger guests to sign up. Ally will entice men with the NFL Sunday Ticket.
The DirecTV's $40-billion price tag is big, even for Murdoch. In last week's issue, Deputy Editor John M. Higgins reported that Murdoch is a bit strapped these days and is juggling his finances and lining up partners to help meet GM's asking price. Microsoft and Liberty Media have stepped up, but I'm not sure for how much.
But make no mistake: What Murdoch wants, Murdoch gets and Murdoch wants DirecTV. In fact, Murdoch has coveted a satellite service since the early 1980s when he invested heavily in a medium-power satellite service that required relatively big dishes-a meter or more wide. He wisely bailed out of that deal.
In 1990s, the DBS-obsessed Murdoch joined Hughes, Cablevision and NBC in Sky Cable, which promised to deliver service to flat antennas the size of napkins. That fell apart. Too many egos.
Murdoch then forged AskyB with MCI, which bought some prime DBS spectrum at auction. To mitigate the risk, Murdoch partnered with EchoStar's Charlie Ergen. To know Murdoch and to know Ergen was to know one important thing: That partnership was doomed. Finally, Murdoch linked up with Primestar, the major cable operators' DBS entry. The government didn't like that one. Neither did partner Time Warner.
So why does Murdoch covet DirecTV so? It would give him another platform for his networks and all that programming coming out of Fox studios and allow him to continue snapping up all the sports rights he can get. And unlike other distribution media (broadcasting and cable, for instance), DBS still has plenty of upside. If DirecTV is 10 million today, it could easily be 20 million in five years, especially with the Fox engine driving sales.
If Murdoch has his way, he could do worse than leave the present management in place. After all, Eddy Hartenstein and his team built DirecTV into a $40 billion asset, despite unexpectedly fierce competition from EchoStar. There's no reason he couldn't take it to the next level under the Murdoch/News Corp. flag. But if the new owners contrive one, I hope GM rewards Hartenstein with something more than a new Caddy.
This final note:
As I'm sure you all recall, in my last column (B&C, Jan. 8), I scolded the National Association of Broadcasters for a proposed by-law change that would empower the board to dismiss summarily any of its members found to have leaked inside information to the press or anyone who happens along. The column appeared after the full membership mail-in vote had been taken, but before the vote was tabulated. Here's the final count: 1,983 to 4 in favor of the provision.
It's too damn bad my argument wasn't out a week or two before the voting deadline. I'm sure it would have turned it around. Recount!
Jessell can be reached at
email@example.com or 212-337-6964.