Bye Rupert! Liberty Acquires Control of DirecTV

Posted Friday, December 22, 2006

The Rupert Murdoch era at DirecTV — one in which the company came increasingly under criticism for both its programming lineup and multiple hardware disasters — is about to end, after the media mogul agreed to swap his stake in DirecTV for News Corp. stock held by Liberty Media — and its chairman John Malone.

This puts Liberty, one of the nation's largest cable operators, in the satellite business, plus gives it ownership of three regional sports networks in Pittsburgh, Denver and Seattle and cash.

"We are happy to become the largest shareholder in the world's largest satellite television provider. Chase Carey and the DIRECTV team have done a fantastic job, and we look forward to the strategic benefits of them joining the Liberty family," said Liberty President and CEO Greg Maffei in a joint Liberty-News Corp. press release. "During 2006 we converted many passive investments into strategic operating businesses, but this transaction is the largest and most important. DIRECTV and the regional sports networks represent a critical step in our efforts to transform Liberty Media into a well-positioned, focused operating company."

It will be interesting to see how a major cable operator — which until recently battled against satellite providers in lockstep with fellow cable operators Time-Warner, Cablevision and Comcast — and whether there will be changes in the market model. DirecTV has come under increasing heat for ending its sale of satellite receivers through licensed manufacturers, and forcing subscribers to lease DirecTV-made receivers — many of which have been plagued by design and reliability issues. The company has also come under attack for poor picture quality — especially in its HDTV channels, which have lower resolution than broadcast HD channels and at times appear to be heavily compressed.—MM