$6.6B DirecTV Purchase: Murdoch move ups ante in share battle

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The battle has just begun. News Corp.'s agreement to acquire DirecTV for about $6.6 billion is expected to accelerate a struggle for the eyes and pocketbooks of TV viewers.

The acquisition ushers in News Corp. Chairman-CEO Rupert Murdoch as a major U.S. satellite operator reaching 11 million subscribers and the expectation is that he will put significant resources behind an already-aggressive marketing push for satellite services over cable.

"DirecTV was in a latent phase or dormant phase during the uncertainty over its ownership," said Harold Vogel, president-CEO of Vogel Capital management. "Murdoch now will step up the competition, not only against [satellite TV service] Echostar, but also against the cable business in general. And should there be a technological advance enabling more Internet services from satellite and so on, you can be sure he will exploit that too."

According to Taylor Nelson Sofres' CMR, cable and satellite companies spent a combined $660 million in measured media, with Comcast Corp. leading the charge, spending $158 million while DirecTV spent a close second at $137 million. Meanwhile, Cablevision, which spent $77 million last year, is searching for an advertising agency to handle marketing for a new satellite system called Rainbow DBS. The carrier expects to spend an additional $100 million on advertising once the service is launched.

"It will be a market-share battle," said Jessica Reif Cohen, Merrill Lynch media analyst. "News Corp. and Fox will use their multiple media platforms, their TV stations and networks to promote DirecTV heavily. Likewise for cable, after Comcast took over AT&T, their marketing has stepped up. They've done an excellent job of winning back subscribers from satellite."

Advertising for DirecTV, El Segundo, Calif., is handled by Interpublic Group of Cos.' Deutsch, New York. A Deutsch spokeswoman said they could not predict if new ownership would affect spending. Publicis Groupe's GM Mediaworks handles the media buying.

too early to tell

"It's way too early to tell," said a News Corp. spokesman. "We are not anywhere near developing anything yet as detailed as a marketing plan for DirecTV."

If a marketing war does erupt, expect DirecTV and other satellite operations such as Echostar to emphasize lower pricing, said the analysts.

"Now with more aggressive satellite, and always the potential for broadband delivery, there really is more of a chance of a marketplace out there, and the cable people are going to take the gloves off," said Tobe Berkovitz, professor of mass communication at Boston University.

What will new marketing campaigns look like?

"DirecTV advertising will talk about clarity of picture, lower pricing, wide availability of sports, and the tie in to all of the other News Corp. services," Mr. Vogel said. "And they will keep zeroing in on those nasty cable companies, who don't get to your house until four weeks after you call them."

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