Liberty Media Eyes DirecTV Tie-Ins

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Liberty Media's bailout of Sirius XM Radio could lead to at least some bundled offerings with the media giant's DirecTV satellite-TV service, Liberty CEO Gregg Maffei told analysts last Wednesday.

Liberty agreed earlier this month to bail out Sirius, which was fending off bankruptcy and a buyout offer from DirecTV rival Dish Network. As part of the deal, Liberty would invest $530 million in the satellite-radio giant in return for a 40% interest in the company.

The deal was largely seen as a financial play for Liberty rather than a strategic move. On a conference call with analysts last Wednesday to discuss Liberty's fourth-quarter results, Maffei offered some more clarity on the possible synergies with Sirius.

Maffei told analysts that he saw opportunities for bundling Sirius service with DirecTV in the future, but declined to be specific.

“One could talk about or imagine bundles, probably the $80 [per month] DirecTV product offering free trials of the $11 [monthly] Sirius XM product more likely than the other way around,” Maffei said. “I certainly think those are things we have talked about and we didn't put a lot in our valuation for that. But it is something [Sirius CEO] Mel [Karmazin] is enthused about and something I believe [DirecTV CEO] Chase [Carey] is enthused about. I hope we will be able to proceed on some of those in ways that are obviously beneficial for both parties.”

Maffei also addressed speculation that some of Sirius' satellite spectrum could be used for DirecTV video. While he said it is possible — by consolidating the Sirius and XM Radio platforms, freeing up half of the 25 Megahertz of spectrum allotted to it — he said it is “a long way down the road.”

“There is no plan currently to merge the two platforms,” Maffei said adding that Sirius already offers a limited amount of mobile video — mostly kids' programming.

“To really expand that in the mobile-video space; we'll see,” Maffei said.

The fourth quarter was a mixed one for Liberty, with continued declines at its QVC shopping channel offset in part by strong results at Starz Entertainment.

Home-shopping network giant QVC continued to struggle — overall revenue dipped 8% to $2.14 billion and domestic revenue fell 12% in the period. Cash flow at the unit fell dramatically — 22% in the period — as sales of higher-margin products like jewelry declined sharply. The company has said it is aggressively trying to reduce inventories and lower bad-debt costs by tightening up its credit policies.

On a conference call with analysts, QVC CEO Michael George said that the home-shopping giant was plagued by the same economic issues that other large retailers have faced.

“It was a tough quarter,” George said, adding that declines in the jewelry and apparel segments drove most of the weakness. But George added the fall-off was more due to core customers buying at a slightly lower frequency rather than a slowdown in new customers or customers defecting from the channel altogether.

Maffei also addressed the speculation that QVC would eventually buy No. 2 shopping channel HSN. Maffei said that QVC is prohibited from making a bid on HSN — it already owns about 30% of the network — until May 2010.

“I'm not saying that we will,” Maffei said of making a play for all of HSN. “But we do believe we are the natural owner at some point of that company. We're the one with the most synergies.”

Maffei added that in the meantime, QVC has the right to increase its stake in HSN from 30% to 35%.

“We'll monitor the time and place to do that,” Maffei said.

At premium cable network Starz Entertainment, the performance was markedly better. Cash flow at the movie channel surged 69% in the quarter to $81 million, on a revenue increase of 8% to $285 million, fueled by the inclusion of Liberty Sports Group — which houses Major League Baseball's Atlanta Braves and three regional sports networks — and increases in subscribers and monthly rates. Starz added about 300,000 new subscribers in the quarter, upping its total base to 17.7 million customers.

On the conference call with analysts, Starz chairman and CEO Robert Clasen said that the results reflect that in a down economy “at least so far, subscription TV has held up reasonably well.”

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