'Unprecedented Competition' Coming

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News Corp. and Fox Entertainment Group chairman Rupert Murdoch said that he expects to close his deal to purchase a controlling interest in DirecTV Inc. parent Hughes Electronics Corp. in the coming weeks, adding he plans to offer "unprecedented competition against the dominant cable companies."

During his prepared remarks at the Fox Entertainment annual shareholders' meeting here Nov. 25, Murdoch said the plan is to enhance interactive services, offer broader local-into-local broadcast-TV coverage, introduce new services like digital video recorders and improve customer service.

Free DVRs

Later, in a brief interview after the meeting, Murdoch said part of that strategy would include matching pricing promotions from rival direct-broadcast satellite provider EchoStar Communications Corp., including offering new customers free DVR boxes.

"We will match EchoStar," Murdoch said. "But we're not going to start a price war."

EchoStar has been extremely aggressive in free promotions, offering customers two packages — a free three-room system complete with satellite dish, receivers and professional installation for a refundable $49.99 fee, or a DVR plus a three-room system for the same refundable $49.99 fee.

News Corp. owns an 80.6% interest in Fox, which includes the Fox broadcast network, Fox Cable Networks Group and the 20th Century Fox movie studio.

However, Murdoch said that DirecTV won't echo the No. 2 DBS service provider's anti-cable marketing campaign — dubbed "Stop Feeding the Cable Pig" — once his company takes control of DirecTV.

"I think we'll be pushing the benefits of DirecTV and leave it at that," Murdoch said.

Murdoch added that he believes that he has his management team set at DirecTV. News Corp. announced Nov. 21 that Fox Television Stations Inc. chairman Mitchell Stern would become president of DirecTV once the merger closes, replacing Roxanne Austin.

While speculation has been that Hughes vice chairman Eddy Hartenstein also could leave, Murdoch said it won't be at his request.

"I certainly hope he [Hartenstein] stays," Murdoch said.

Earlier, in a question-and-answer session with reporters following the meeting, News Corp. and Fox Entertainment president and chief operating officer Peter Chernin said that negotiations between Cox Communications Inc. and Fox Sports Net are moving ahead smoothly.

Chernin would not comment on reports in Broadcasting & Cable
(a sister publication to Multichannel News) that FSN has agreed to a 7% to 9% average annual rate increase over five years, substantially lower than the 35% the sports network originally proposed.

"We're having fruitful negotiations with them," Chernin said. "We're optimistic that we can conclude something reasonably soon."

Few Cox 'Snags'

Chernin also wouldn't comment on reports that the main sticking point in the negotiations is over retransmission consent of Fox's owned-and-operated television stations. According to B&C, Cox would prefer to do one large deal to solve both cable and broadcast issues.

"I'm not convinced there are any snags," Chernin said. "We've been having productive negotiations for several weeks now, I think both sides are optimistic and certainly both sides are working hard to get something done."

Fox Sports Net's contract with Cox expires on Dec. 31. Retransmission-consent deals end in March.

Regarding talk that Comcast Corp. is negotiating with Cablevision Systems Corp. for the Bethpage, N.Y. MSO's controlling interest in regional sports networks Fox Sports Net Chicago, FSN Ohio, FSN Bay Area, FSN New England and FSN Florida, Chernin said that he has not been contacted.

"We have heard rumors that there have been discussions going on between Cablevision and Comcast," Chernin said. "Those don't involve us. At some point they have to come to us. They know where to reach us."

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