DirecTV recently reached a deal with Hilton Hotels & Resorts to provide its service in more than 500,000 hotel rooms across the country, marking a years-long effort to expand its presence in the hospitality and multiple-dwelling unit space. The deal, which helps solidify DirecTV’s position in the space, has gained some notoriety of late — some reports have said it was Hilton’s insistence that moved DirecTV to reach a carriage deal with The Weather Channel after dropping the network three months ago. Michael Wittrock, the satellite-TV provider’s senior vice president of sales, point man on the Hilton deal and catalyst for the company’s moves into the hospitality and MDU businesses, spoke last week with Multichannel News senior finance editor Mike Farrell. An edited transcript follows.
MCN: Is the Hilton deal the biggest hospitality deal you’ve done?
Michael Wittrock: I think it is the biggest deal we have done. But this is a first-of-its-kind deal. Hilton did [a request for proposals] on in-room entertainment service last year; they are really the first to do a full-on RFP for in-room entertainment. This is about, for them, raising the standard for their guests, giving their guests better quality and consistency. And they also wanted to get a better price, they wanted to do it across all their brands, and they wanted it to ramp quickly across all their rooms.
MCN: Did the Hilton deal have anything to do with the decision to bring back The Weather Channel?
MW: No. I’ve been working with Hilton on this deal for the better part of eight months. We were working with them long before that became a headline. It had nothing to do with it. We were working on [creating] strategic value for both of our brands, and it was in a process that Hilton started. We put a lot of hard work into it going back several months. I was the closest to it in our company. I don’t work on programming deals; that’s somebody else. It was a separate issue altogether.
MCN: What is behind the recent focus on the hospitality and MDU markets?
MW: The video market is starting to become a bit of a mature market, just a little more challenging to obtain the kind of growth that we would typically like to see. So we’ve turned to emerging markets like Latin America, commercial, MDU and advertising sales, things that are beyond the traditional core business.
In our commercial business, which includes hospitality, we see a lot of potential for growth. Apartments and multi-dwelling units, it’s almost a quarter of the living space in the United States — about 32 million apartments and condos. And the way we see it, apartments are growing faster than single-family households.
MCN: Can you get into specifics?
MW: Let’s start with hospitality. We started investing in technology in hospitality before 2008. In 2008, we launched a product called the COM1000, which is essentially a high-defi nition headend for hotels. We were the first distributor to come out with a product that allowed hotels to launch HD. In 2011, we came up with the DirecTV Residential Experience, which is literally taking an experience like customers have in their home and putting that in the hotel room.
The hotel experience from a video perspective really lags the home experience by a large gap. You might have an average of 30 or 40 channels in a hotel room in the U.S. and most of those will be in SD, where in the home they have hundreds of HD channels, especially if they’re DirecTV customers.
We’re adding a lot of interactivity — we already have the slick interactive-programming guide and the HD user interface and hundreds of HD channels. We’re going to continue to layer in interactive features that hotels can modify for themselves, [adding] their own messaging, their own brand and look. It’s their communications portal to the guest in some respects.
MCN: In the past, it seemed the main concern for hospitality properties was having a robust pay-perview movie service. Is that still the case?
MW: The video-on-demand presence has always been a little bit prevalent in the hospitality space. The way we see it, it’s sort of a capital-intensive product: anybody that’s getting video, they’ve got to buy some hardware to put on their property to deliver it. To try to save their capital budgets, a lot of hotels were letting these pay-per-view aggregators in their door as a way to help them pay for that capital equipment. You had some good first-run movies from Hollywood for a price, but you only had a handful of channels to watch that were linear. A lot of hotels have upgraded and are continuing to upgrade to high-definition flat-screen TVs. I think people want linear.
MCN: You also provide PPV movies, just not at the same level.
MW: We provide pay-per-view movies through our DirecTV Cinema product in the residential space. Using DirecTV Residential Experience as a platform, we are building that same kind of look and feel into the hospitality space. We have not launched it yet.
MCN: What do you see as the opportunity in the MDU space?
MW: I would say it could be similar in size to what we could attain in hospitality. In the United States, it becomes a question of, how do you want to serve that space? Dish-on-balcony is an inefficient way to serve it; a centrally wired system is a more efficient way to serve it. Customers that we have dish-on-balcony, I’d like to get their whole building with a centrally wired system. I see that growth as very similar to the growth aspect of the hospitality industry.
MCN: Do you strive for exclusive deals when you approach MDUs?
MW: We absolutely, as you would imagine, would strive for an exclusive deal. But the space is evolving, and I understand it. I would say the space is evolving more towards choice.
Think about it. Even if they pick two providers and they have cable and DirecTV on property, you might have somebody down the street in a single-family household that has four choices for video. They probably, in today’s competitive environment, probably can’t get away with just one.
MCN: Can you tell me how many MDUs you have?
MW: It’s just so complex. Our centrally wired systems, our number of wired units and our number of customers that are dish-on-balcony; I’m not sure from an analytics perspective that we have a solid bead on that yet. But I will tell you this, what we want to do is, we are going to ramp up and grow our centrally wired units and wire up as many with DirecTV as we can and see that as a potential to grow. At some point, we think it could grow up to twice as fast as what we see in the residential space.