Murdoch Sells DirecTV : Does He Know Something Liberty Media Doesn't?

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Includes: NWS, QVCA, T
by: Frank Barnako

Rupert Murdoch's involvement with satellite TV in the U.S. didn't last long and you have to wonder whether he knows something that John Malone doesn't. Murdoch fought to get into DBS in the States and is now walking away as his News Corp. (NASDAQ:NWS) has begun to swarm the Internet.

It's said that John Malone, whose Liberty Media (LINTA) is set to be the new majority shareholder of DirecTV (DTV), is looking for some partners to keep DTV's business in orbit. High on the list of things to do, possibly, is to get closer to WildBlue, a satellite provider of broadband Internet access. That way, DTV could compete with the telephone companies’ “Triple Play” bundle bundle of programming, Net, and phone.

Only problem is that WildBlue's pricing is out of this world. Equipment costs $299 and $49.95/month gets you a plodding 512K down and 128K up. That may be fine for getting online from a cabin in Montana, but if Malone wants to be competitive with broadband in Boston or Los Angeles, he needs a Plan B.

That could be Verizon (NYSE:VZ). Its DSL could be an option for DirecTV to offer in its own bundle. But VZ's service is not available everywhere; not even in some homes which now subscribe to DirecTV. Like mine. Meanwhile, Verizon is bulking up its own programming delivery business. Verizon's FIOS (TV and Net over fiber optic) is well underway, and AT&T (NYSE:T) is today announcing the availability of its own fiber optic programming/Net access U-verse service in new markets including San Francisco

You might wonder about Malone's eagerness for DirecTV. Well, it's all about distribution. The DTV deal makes Malone virtually the only guy, other than Time Warner's (NYSE:TWX) Richard Parsons, with a portfolio of content assets (uh, cable channels) and a way of delivering them to consumers. Liberty Media include's QVC, the Starz Entertainment movie channels, and an interest in Discovery Communications. Years ago, Malone had the content and a cable TV behemoth to deliver them. You might say he's rebuilt the business replacing cable with satellite.

But, there's that Internet thing, still laying there. It’s still about “the last mile,” getting the content and service to the house. If Malone can figure it out it, he'll have done something Murdoch couldn't, or didn't, do.

A few postscripts:

* Isn't it possible that Verizon and AT&T and other telcos might want to buy DirecTV and DishTV (NASDAQ:DISH)? Imagine the efficiencies!
* Is the DirecvTV purchase a lifeline for Tivo (NASDAQ:TIVO). DirecTV's been building its own DVRs, and maybe Malone would be open to renewing DTV's deal with Tivo.

NWS vs. DTV vs. LINTA 1-yr chart:



Disclaimer: I own shares of Time Warner.

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