11.24.2003 12:00 PM
Eyes on DirecTV as News Corp. takeover nears

If News Corp. gets government approval to buy DirecTV, an action expected before year’s end, the new entity will be closely watched as it tries to deploy a full array of new technologies.

It’s been suggested that the future of interactive television (ITV) in the U.S. may rest on DirecTV’s success or failure in deploying new services over the next year. Though cable operators have introduced on-demand video and personal video recording in key markets, many are skeptical of the prospects for most ITV services. A DirecTV under News Corp., however, has promised in its FCC filings to deploy ITV services in the coming year.

Analysts at the research firm, the Yankee Group, have been watching ITV technology, which has been essentially stalled over the past year as cable operators wait and see.

“They (cable operators) are not convinced that ITV will make a huge difference in the market,” said Yankee Group analyst Adi Kishore. He noted that direct-to-home satellite providers have deployed ITV to 12 million homes, but cable has begun service to only two million ITV homes, with only Cablevision, Insight and Charter seriously pursuing the market. Most multiple system operators, he predicted, will wait until 2005 at least to deploy ITV.

In a filing with the FCC in September, DirecTV outlined plans to introduce a new set-top box user interface in the coming year, deploy new middleware to enable more ITV services, and plans to add at least one million integrated DVRs each year starting in 2005.

“DirecTV is not waiting for anybody,” Kishore said, predicting the satellite provider will soon launch a service that allows viewers to choose alternating camera angles during sporting events. Based on Yankee Group consumer surveys, he said multiple camera angles is one of the top two most attractive interactive applications. The second is supplemental information about the program being viewed.

Another post-acquisition issue is whether DirecTV will continue its relationship with TiVo. News Corp. owns NDS, a technology company that can provide digital video recording capability into its own the set-top box. To date, DirecTV provides an estimated half of TiVos one million customers.

Still another technological challenge for DirecTV, this one with political implications, will be fulfillment of a promise to the U.S. government to carry all local TV stations signals by 2008 “if technologically feasible.”

Last week, two members of Congress proposed that DirecTV be made to live up to the promise as a condition of government approval of the deal. Reps. Bob Goodlatte, (R-Va.) and Rick Boucher, (D-Va.) argued that News Corp. is not willing to move fast enough to bring local station coverage to all 210 television markets.

For more information visit www.newscorp.com.

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