Fox acquires DirecTV
Under the guise of “increas[ing] competition in the cable markets and promote better services to U.S. customers,” News Corp. (Fox) has just bought controlling interest in Hughes Electronics, owner of DirecTV. The $6.6 billion dollar deal takes U.S. satellite TV leader DirecTV out of the hands of a non-media parent (General Motors, which owned Hughes). This now solidifies the power of the Fox Entertainment Group, giving it ownership of one of the means of distribution as well as many of the goods (in the form of TV networks and programs) distributed.
DirecTV ended last year with over 11 million subscribers. The only U.S. pay-TV company that is larger is a cable company, Comcast, with some 23 million subscribers. Fox can combine it with its satellite TV operations in Europe, Asia , Australia,and Latin America.
Fox/News Corp., like many of its competitors is following a strategy of vertical integration. It is developing broadcast and cable networks, producing programs, and now owns one of the major pipes for distributing content in North America. That puts Fox in a position of power at every level of the television industry, Short-term, the reaction on Wall Street has been very negative. After all, the example of AOL Time Warner is an object lesson in how such seeming synergy can fail. But it's clear that news Corp. management believes that the long-term advantages are considerable, as the battle between a decreasing handful of media giants heats up.
One predicted bonus will be the launching of new Fox networks. One commentator already noticed that DirecTV agreed to carry the Fox-owned TV Guide Channel shortly before the buy-out was announced. As Fox develops new channels, something it has done steadily over the last ten years, it has at least one sure venue for trying them out. Another move might be the widespread availability of interactive TV, with which Fox has had major success abroad. Only by owning the programs and a delivery medium can interactive TV really work. (For example, the ability of the viewer to choose camera angles at a sporting event from his remote control.)
One final hurdle is the regulators. But in this case, there is little worry. The FCC seems almost too happy to allow for concentrations of media ownership. Plus, Fox has endeared itself to the Bush Administration through its cheerleading news coverage. [Oligopoly Watch]