DirecTV-News Corp. Deal May Boost ITV, DVR Tech

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News that Rupert Murdoch's News Corp. may take control of Hughes Electronics Corp., parent of DirecTV Inc., may bring a glimmer of hope to the foundering U.S. interactive TV market.

Industry observers predict DirecTV may be infused with some of the high-tech philosophies of one of News Corp.'s other direct-broadcast satellite providers, the U.K.'s British Sky Broadcasting plc.

Thus, DirecTV would pick up the pace of digital video recording technology and interactive services to counter the digital offerings of its cable rivals.

During the conference call that announced the deal, Murdoch argued the case for using digital video recorders to answer cable's growing video-on-demand business. He noted that News Corp.'s BSkyB has made a successful play with its "Sky Plus" DVR service in London.

"It truly enhances the viewing experience, putting interactive capacity into the set-top boxes and putting [DVRs] in as well," Murdoch said. "Hughes has just started doing that with TiVo."

Indeed, through a partnership with TiVo Inc., DirecTV has deployed DVR service on boxes supplied by Sony Corp. and sister company Hughes Network Systems. At January's Consumer Electronics Show, the DBS provider announced a high-definition TiVo box, to roll out later this year.

DirecTV may also get a transfusion of stronger ITV blood, as News Corp. applies what it has learned from an aggressive rollout of such services on BSkyB, and because of a recent consolidation among ITV providers.

BSkyB has rolled out a slew of interactive services on an OpenTV Inc. platform, including TV-based e-mail, chat, gaming, news flashes and a multicamera sports-event application. It's a good bet that philosophy will pollinate DirecTV, said Yankee Group satellite analyst Aditya Kishore.

"I would absolutely expect that," he said. "I think they have been very aggressive with enhanced-TV applications in the U.K., and they have also had a lot of success with this camera-angle selection applications.

"DirecTV has been strongly positioned with sports, and it is a common demographic — BSkyB's initial success also came from licensing the Premier League of soccer in the U.K."

For its part, DirecTV has already fielded two interactive offerings, including Internet access, digital recording and search platform through Microsoft Corp.'s UltimateTV. But UltimateTV is now in hibernation — though Microsoft still supports it, the software giant ceased marketing the service after it reestablished its TV unit late last year.

Of greater interest to many observers, including Kishore, is DirecTV's other interactive advertising and program-information platform, provided by Wink Communications Corp. OpenTV acquired Wink in October, and both now are under the control of Liberty Media Corp.'s Liberty Broadband Interactive Television.

The fact the two interactive players have now merged may speed that synergy, Kishore said.

"It helps, because Sky has deployed a number of applications in the U.K. and they have actually generated revenue, so the idea is to try to replicate that on the DirecTV platform in the U.S.," Kishore said. "It's always going to be easier if you understand the platform and it is something that is familiar, and it is easy to port applications as well."

By contrast, the future seems decidedly clouded for DirecTV's struggling broadband services, which recently have staged a retreat.

HNS still fields its DirecWay satellite broadband Internet service, but it recently stopped marketing the product. The service drew just 16,000 customers.

In January, Hughes benched its digital subscriber line unit, DirecTV Broadband Inc., because of poor performance.

During the conference call, Murdoch indicated there was a place for broadband in his company's satellite universe, but left his options open.

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