Wednesday, May 6, 2009

Things Are Shaking At DirecTV And Sirius XM


DirecTV is valued at 24 billion dollars and no one really has any idea what to do with it. Sirius XM Satellite Radio continues to limp along with a single share of stock worth 47 cents. Its demise has long been forecast.

But, something behind the scenes is happening that may well change the fates and fortunes of both companies. His name is John Malone and his company is called Liberty Media.

Click here for a Wall Street Journal story about the recent (tax-free) move to consolidate the ownership of DirecTV. The ultimate motive is to make the company available to potential sale or merger with a phone company. Confused?

The cable TV companies are killing satellite TV by offering residential customers a low-cost combination of cable TV, high-speed Internet access and telephone service. This bundling of services is offered at a price that separately DirecTV and the various phone companies can't match.

The solution is to sell or merge DirecTV with a phone company that also offers broadband Internet service. That would allow this new company to now come at you with satellite TV, Internet and phone service bundled. Simply by matching the price of the cable TV companies, this new entity would be able to compete.

Before you get bored with this column, let's talk NASCAR. DirecTV's Hot Pass service was cancelled because it basically only reached the 13 million customers that DirecTV had in 2008. Out of that base, they were unable to guarantee that enough folks would pay additional fees for Hot Pass in 2009. Wait, it gets better.

Here is the latest twist. Click here for a little column whispering about the fact that Mr. Malone recently stepped-in and bought a 40% share of Sirius XM Satellite Radio. Now, why would he be interested in this struggling and essentially bankrupt company?

Could it be that he envisions offering Sirius and DirecTV combined on your home satellite dish? After all, it is satellite radio.

In the not so distant future, you could be approached by a company who could offer all the NASCAR programming carried on the broadcast and cable networks sent to you in HD on a home satellite dish. This time, however, that same company could offer you home phone and high-speed Internet service at the same price as the cable TV company offer. So, what would sweeten the deal for NASCAR fans?

OK, take a deep breath. First, all the NASCAR TV programming comes on the satellite dish in HD. Then, Hot Pass gets resurrected in the same fully-produced format. Finally, you get Sirius XM's NASCAR channel 128 available fulltime on the same home dish, just like the music channels now on your cable TV dial. Of course, all of this now comes with high-speed broadband Internet for your NASCAR surfing and telephone service to tell all your friends. Whew.

In January of 2008 we wrote a column about convergence. Click here to read it. Convergence is "the modern presence of a vast array of technology to perform very similar tasks." After reading this column, does that sound familiar?

There is a huge battle raging over which companies will get access to your home and who can bring the most toys for your entertainment pleasure. Mr. Malone seems to be intent on combining DirecTV, Sirius XM, Internet access and phone service to beat the cable TV companies at their own game.

The financial moves this week may well be companies setting themselves up for big changes in the future. While the TV networks and the personalities may remain the same, how and where you watch and listen to NASCAR programming in 2010 may be very different.

Update: Remember, we are talking about a combined company. Only the TV and Sirius XM portions would be delivered on a home satellite dish. The Internet service and phone would be brought into your house on a land-line, just like the traditional phone companies offer now. Thanks to several TDP readers for asking a question about that issue.

TDP welcomes comments from readers. Just click on the comments button below to offer your opinion on this topic. This is a family-friendly website, please keep that in mind when posting.

Thank you for taking the time out of your day to stop by The Daly Planet.

42 comments:

RvNGrammy said...

Very interesting! DirecTV, Sirius and phone by satellite? Or how will they do the phone? If it is all by satellite, how much will the dishes cost? I just paid $1800 to upgrade the dish on my motorhome to HD. Sure hope they don't want me to spend more money!

RvNGrammy said...

Oh, and Internet service as well? High speed internet by satellite is VERY expensive right now. And requires a $5000 investment in equipment. It will be interesting to see how/if they can do that.

Jack from PA said...

I must say I haven't heard a word about this, and I'm on the computer quite a bit. Perhaps, for once this year, some positives coming out of NASCAR TV Land!!!

Karen said...

I've vigorously defended having a separate company for my home phone and fax line and then my TV and Road Runner. But that said, all together I pay about $300 a month plus my cell. Almost forgot about that.

Is there anything I'd be missing if I had DirecTV? Any channels I wouldn't get? I have a lot of premium channels. Would I have those?

I've had plenty of friends tell me they didn't like AT&T and BellSouth for their ISP.

bevo said...

DirecTV has had XM and Sirius music channels for several years (they're in the 800 range of channels). I believe Mr. Malone's interest in SiriusXM is solely for the satellites and facilities. That's why he bought all of that debt. I've been a Sirius and XM subscriber since the beginning and love it but I can see the witting on the wall - satellite radio will be dead within three years. Hope I'm wrong but I don't think I am.

Anonymous said...

Good on the bundling aspect of communications. While CATV companies now offer TV/phone/internet thru the same cable, the old copper cables most phone companies utilize to provide telephone/internet service are not capable of carrying TV signals, thus the current situation where companies such as Verizon utilize Direct TV to create their competing bundle. However, in densely populated areas, Verizon is rolling out a service known as fios which delivers all 3 services to homes via a direct fiber feed which flat out kicks any CATV company's butt for speed or picture quality. Stay tuned......

Anonymous said...
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Vicky D said...

Oh no, sounds like we are going to be spending more money, but if it's better it'll be ok. We like our DirectTV which does have the satellite music stations and I really enjoy that. Onward and upward let's see what happens.

Anonymous said...

Uh, if you have DirecTV, you can already get many of the music channels from XM on there.

And in my book, cable is not killing satellite service at all. DirecTV has been growing steadily the last two years because of their 100+ HD channels, something cable and FIOS still can't match. No way I'd ever give up my HD channels for a "bundled" package from FIOS. We get our internet and phone through Verizon FIOS, but it's still well worth it to me to keep DirecTV for the HD channel offerings you can't get elsewhere.

glenc1 said...

I would not have Direct because of its former ownership, but this could change things. We do have all kinds of 'bundling' going on here. Nearby (not available to me) is Frontier phone, which offers phone, plus Internet service (DSL) plus DISH (they made a deal to group it.) This was to combat T-Warner's bundle. For me, it's cheaper to pay for services separately because I'm not a big cellular user, nor do I need HD at this time, plus, I'm not even that heavy an Internet user (not a gamer and I don't watch movies that way). Don't know how they'd price such a thing. But I find myself wondering--what do you people do all day, lol??? I mean, you'd never need to leave the house...

Anonymous said...

The speculation in the Satellite TV world is that Directv would be bought by AT&T.

That would bring the bundling packages. TV/Radio from the dish and Internet/phone service via Hard line from AT&T. NOT Satellite internet service.

I've not been a fan of AT&T for quite a while. They would have to offer some pretty sweet deals for me to convert from TWC for my Internet and PHone service..

I already subscribe to Directv and Sirius.

Dave In Milwaukee

Anonymous said...

At least in my area, Verizon and DirecTv are kinda together. Sure, Verizon offers the FIOS service, but I keep gettin promo materials from Verizon to add DirecTV.

Wish that DirecTV would pick up NASCAR radio though.

TexasRaceLady said...

hogwoodI have DirecTV simply because I have NO other option. No cable, no local antenna, no nothing.

I use HughesNet for my internet. While good, it is not high-speed, but it is still faster than dial-up which is my backup in bad weather when the signal goes out.

Embarg, my phone service, says I should have DSL out here by the end of the year. *fingers crossed*

The only downside to satellite --- the extremely bad weather we can get here in Texas.

alex said...

That is interesting, I had no idea satellite was dying a slow death due to cable bundling. I have comcast for tv and internet, though I hate it due to the horrible customer service and the terrible quality of equipment that they installed.

It's a shame, because I had originally ordered DirectTV and found it to be a cheaper and better alternative to comcast. But with too many trees around my place they couldn't install the dish.

I just wish FIOS was available in my area and there was a cable alternative to Comcast. Looks like I'm screwed for the indefinate future.

Oh yeah, and no SPEED HD either. Anybody with a dish looking for a roommate?

Anonymous said...

texasracelady has a point you should all listen to. my direct tv goes out with some rain. hd shows go first and regular feed looks terrible on plasma. now i have a problem with not getting channels i'm paying for. direct tv wants to charge me $50 to come out to check their equiptment! so long direct tv.

Daly Planet Editor said...

Lots of you are missing the point. There would be no satellite dish involved in either the Internet access or the phone service.

The new company would be a combination of DirecTV and an existing phone company (BellSouth, Sprint, Verizon) that offers Internet and telephone service.

Bevo, the Sirius XM channels are made available as music features, the buzz is that channels like 128 would be added to the mix and other specialty sports channels may also crop up.

As you may know, ESPN is in the middle of a big radio roll-out and is actively seeking to corner the sports radio market.

All of this is interesting because there is absolutely no road map and it forces traditional companies to rethink their way of doing business.

It's going to be fun to watch.

JD

Tracy said...

We tried to get the satellite TV set up last year so we could get the Nascar deal, and the installer said he couldn't aim the satellite so we'd get a signal. Too many huge old trees in our neighborhood. A friend with satellite TV had to get a big bracket put on top of her house to pick up the signal, because the installer said the satellite was dropping lower in its orbit. (Really, that's what he said!) Her homeowner's association protested, they had to take it down. I don't see too many DirectTV satellites around here, and I look for them because I'm interested in the tree-issue.

We switched to FIOS instead, and I have to say, it's light years better than Comcast and its bundle.

Tony S said...

Interesting article. DirecTV already has bundling with Qwest. DirecTV picture quality is so vastly superior to cable's highly compressed signals that I would never consider switching. As another poster said, the HD offerings from DirecTV also far outweigh any cable providers also. All in all, I will be sticking with my Comcast internet and Satellite TV. Plus, Hotpass is still on 4 channels every week for free!

glenc1 said...

location, location, location...a lot of you make good points about where you are regarding both availability & weather. My DISH has been out maybe an hour total in the 5 years or so I've had it. My cable, on the other hand (I still have basic) had been out for many hours. Only severe thunderstorms seem to disrupt the DISH, but we don't have that many of them unlike some of you.

Last month, T-w decided it was going to choose a few 'test' areas to charge Roadrunner via *usage* rather than monthly fee (which is a crock because it doesn't cost them any more no matter how much you use.) The critics made the point that they're making a lot of money now because the technology is a lot cheaper than when they started. They backed down and said they weren't going to do that, but beware, it could rear its ugly head again. Not sure how that would have worked with the bundling (perhaps it was a ploy to get people to do that...) There was more info at--I think it was a site called 'stop the cap' or something. I think AT&T was already doing it in some test areas as well. Not exactly on topic, but it would affect pricing structures.

This John Malone guy is interesting though--they call him 'Darth Vader'....

David Evertsen said...

ATT is back in the deal with DirecTV it started back in January. If you have ATT and DirecTV call ATT and you can get a $5 credit on your bill. The question is what will they do with ATT/Uverse if they have DirecTv. Do they want both?? Will the FCC allow this to happen. DirecTV is positioning itself as the must have for HD sports and events. This may be the strategy with Sirius/XM..

TexasRaceLady said...
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TexasRaceLady said...

JD, please delete my previous post.

have DirecTV simply because I have NO other option. No cable, no local antenna, no nothing.

I use HughesNet for my internet. While good, it is not high-speed, but it is still faster than dial-up which is my backup in bad weather when the signal goes out.

Embarg, my phone service, says I should have DSL out here by the end of the year. *fingers crossed*

The only downside to satellite --- the extremely bad weather we can get here in Texas.

Unless Embarq is going to join, I'm still screwed. That is my ONLY land line company. I don't even have fiber optic cable out here.

Daly Planet Editor said...

Great points. Cable TV takes the HD signals and does what is called compresses them to basically fit into the cable "pipeline" that comes into your home.

TRL,

The phone companies are building their Internet access at a frantic pace because of what the cable TV companies are doing to them.

The current convergence of all kinds of equipment capable of delivering the same audio and video services is ultimately going to bring prices down as this competition heats-up.

JD

Anonymous said...

They cable companies are actually using switching for a lot of HD channels now. They still do compression hence Comcast mess of poor HD pictures. What the switching does is send the channel when you change to it. It is not there waiting for you when you tune to the channel like the normal way. It is only there when you tune to it and switched on. The cable companies cannot build fast enough to get the HD channels on network and the switching is a quick way to add channels without upgrading everything.

GinaV24 said...

I'd like to see the ability to access all the NASCAR info in one place. I hate that I can't get channel 128 on my computer. I just got a quote from Verizon because they've added FIOS in my area and I'm happy to hear that Comcast will finally have some competition. It's been frustrating me for years that after they bought all the little cable companies they charged a fortune. Well, now I'm wondering if I should make the switch or not or just wait, but considering how long it takes for any of these things to actually take place, I'm probably going to take my chances. But having all NASCAR stuff in one place sure sounds good to me -- I'd love it if there were LESS commercials!

darbar said...

My only concern with this has to do with pricing and no competition. Right now, ATT, Time Warner and others are offering nice packages, but these packages are only good for a certain number of months and then your great pricing goes sky high. Will all this lead to less competition and then therefore lead to higher prices? We all know that once competition dries up, they can set prices as high as they want. That's the problem we have with utility companies---only one is available and they can gouge all they want due to lack of competition.

haus20 said...

The biggest change I would like to see is a DirecTV a la carte package. I have many, many channels. With very little exception, my family and I watch about 10 of them. We don't use the music channels as we have an ipod and a music dock for when we want some tunes. I would drop down to the next lower tier, but I would lose Speed and the HD and DVR options. They got me! I would be willing to pay more per channel if I could choose a "10 pack" or something like that. Instead of 69.99 or whatever it is for all of the channels how about 24.99 for a fav 10 package and so on for a 15 or 20 pack. You can still add the fees for HD and DVR. I may be paying more per channel, but I would be paying less than I am now.

As for the merger of Sirius and DirecTV... It is a nice thought, but unless they are going to allow for an ESPN picture with an Sirius MRN audio overlay on the ESPN channel, I will just stick with my current set up. I have the sirius next to the chair and simply turn up the audio during commercials.

No matter how bad the TV commentators are, I am not going to give up seeing the race just to switch to an audio channel so I can hear it on MRN. I will hit the mute button first.

jim said...

Bellsouth and Direct TV bundled for years...now that ATT owns BellSouth they have continued the bundle unless Uverse is in your area. For NASCAR I cannot take the Fox announcers...too much blathering and promotions and ads...and not enough race. Watch the race and listen to the radio is the better way...hopefully Sirius stays but both Sat and terrestrial radio are losing big bucks with Clear Channel on the ropes as well.

Jackie said...
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Ken said...

I don't understand the "no competition" aspect of cable and Direct. I've had Dish Network for 10 years and have been very happy with it. Some phone companies are installing fiber optic lines that will handle TV service. My brother and sister-in-law both had Dish and switched to Direct. They both regret the decision and plan on switching back as soon as their commitment is over. I get around 300 channels and 130 or so HD channels.

The phone company here (Embarq) has a bundle deal with Dish Network that goes along with their DSL service.

I had an upgrade to my outside dish last week to get the newly activated HD locals. they came when they said they would and did a quick and efficient job. The next day, I got a recorded call from them to verify that I was satisfied with the work. I then got a phone quality survey. 3 days later, a real person called me to again check if I was happy and if they could do anything else for me.

Cable, fiber optic phone service, Direct TV and Dish Network are all trying to gain customers and the shakeout will be interesting.

Anonymous said...

Alex said:

That is interesting, I had no idea satellite was dying a slow death due to cable bundling.It isn't...Daly just seems to have something against DirecTV, so he wants to portrary it that way.

On the contrary, everything I read on actual audio-visual forums is that cable is dying because of their high prices, limited channels in comparison to FIOS and DirecTV.

Daly Planet Editor said...

Ken,

It really is a free-for-all for these various providers. Comcast is perhaps the best current example of a company bundling various services.

Alex,

What are you talking about there my friend?

This is a story about DirecTV working to get a combination of services that can match the cable TV companies.

If you take a moment to go back through TDP columns, you can see our warm reception for Hot Pass and the alternative that it brought for NASCAR fans in terms of viewing choices.

Perhaps, when you return to this forum you can offer your views on the topic we are discussing.

Thanks,

JD

Jack from PA said...

Guys,

Correct me if I'm wrong, but doesn't Verizon have a bundle package, with Fios something or other, which features DirecTV?

I had Comcast for as long as I can remember, but got DirecTV two years ago. My girlfriend has Dish, and I can honestly say that even though Dish does not have SPEED in HD, that's my only gripe. I'm in the process of talking my father into getting Dish instead when the contract (which I think is a joke) expires.

JD,

This may be off-topic, but do you see any other TV service provider coming out with a Hot Pass type deal anytime in the future? Also, could Hot Pass explain in part of the decline in ratings?

Jack

Daly Planet Editor said...

Jack,

I am very much hoping that this column and the comments gets the lack of a full Hot Pass service back in the minds of the NASCAR execs.

Since Turner has the online rights, the TV networks have the broadcast and cable rights, the only way to get something going now is through direct home satellite dish.

At least in a while we will get RaceBuddy back. That really put the lack of any Fox online companion service in the spotlight and left ESPN delivering less than what NASCAR fans wanted during the Chase.

JD

Richard in N.C. said...

JD, Pardon me if I'm repeating something, but didn't John Malone build the biggest cable company and several years ago sell it to AT&T. I believe that was what is now Comcast. John Malone is not someone to bet against - and I'm told is well-known as a bare-knuckle bargainer.

The only competition in almost all areas for cable is satellite TV - and satellite TV just scares the crap out of cable companies. The success of satellite TV is virtually the only thing that will keep cable rates from continuing to increase.

Besides the advantage satellite TV has in not having to have as much capital investment, at least as recently as 5 or 10 years ago satellite TV did not have to pay the 5% local franchise fee that cable has to pay. I'm not sure where this stands today.

Newracefan said...

I have Comcast which costs an arm and a leg. I was all excited when they started digging for FIOS especially when I realized that they utilized Direct TV which meant Hotpass and Speed HD. Well Hotpass is a shell of it's former self and and a year later I'm still waiting for the TV part of FIOS. All I am offered is internet and phone, well the only thing keeping my TV costs somewhat less is that I get internet too. I'll keep hoping and waiting perhaps FIOS, Direct TV and Sirius radio may be in my future someday, and without all that no picture because there's snow/rain/leaves/ wind on the dish like a friend nearby deals with.

Michael Huff said...

I live in a small rural community in Alberta,I get my TV by satillite, my high speed intrnet is through the cable company( I don't have to have the cable TV subscription to get the high speed internet) and my phone is a VOIP. all this costs about $170.00 Canadian a month. The VOIP phone is where I save the big bucks, it costs about a 1/3rd as compared to a conventional land line. All that said, my main reason for this post is to say how devasated I would be if I lost my Sirius-XM radio it stays on channel 128 95% of the time and besides I end up working in a lot of areas where all you can get on a regular radio is CBC North, there's a lot of suicides in those areas.

Anonymous said...

Also the WSJ had a separate article about SiriusXM's new iPhone app. This is great news for someone like me. I'm a Directv customer who likes the XM music but I only get to listen to the sports stations when I rent cars. I never saw the point of buying the device. Now from what I read, I won't have to. I just have to pay for programming. The really interesting thing is the possibilities this opens up--if AT&T were to buy Directv, why wouldn't they serve up directv apps for my iPhone? Why not Hotpass? Or is that impossible because of NASCAR's relationship with Sprint?

Robert Upchurch said...

This worries me greatly. I live in a rural area where AM/FM radio and over-the-air TV is feeble and lacking in choice, and the cable provider (Mediacom) is poor in service and offerings (but high in price...nice how that works, eh?) FIOS won't be coming here in the foreseeable future. Leaving only satellite radio and TV as the only valid options.

I only have a landline phone because I get my internet in a bundle with it...but it sits unused because I use cellphone for 99% of my calls (and not much of that.)

If the satellite services go away I'll be in a world of hurt. It was the availability of those services that convinced me I could move out from suburbia without feeling isolated. I'm not happy to hear this.

Anonymous said...

Just as an FYI to anyone that thinks you cannot have television over a copper wire, you should look north of the border we have been doing it for years. Our government owned phone campany has pioneered the technoligy, and as a side note this is the same company that was a pioneer in fiber optic technology. So all you americans you can follow us again. Enjoy your higher priced TV> Mine is cheap.

Anonymous said...

Just FYI about those who feel DirecTV is having problems. I'd say after this recent announcement on 1st quarter profits, it's the cable companies who need to worry. DirecTV is up 460,000 in new subscriptions. From DBStalk.com:

EL SEGUNDO, Calif., May 07, 2009 (BUSINESS WIRE) -- The DIRECTV Group, Inc. (NASDAQ:DTV) today reported that first quarter 2009 revenues increased 7% to $4.90 billion, operating profit before depreciation and amortization1 (OPBDA) declined 8% to $1.09 billion and operating profit decreased 35% to $424 million compared to last year's first quarter. The DIRECTV Group reported that first quarter net income attributable to The DIRECTV Group declined 46% to $201 million and earnings per share fell 38% to $0.20 compared with the same period last year.

"The growing momentum that we saw at the end of last year has continued into 2009 reflecting DIRECTV's brand strength and unparalleled service," said Chase Carey, president and CEO of The DIRECTV Group, Inc. "Net subscriber additions of 460,000 in the U.S. were the highest in 4 years and were 67% greater than the prior year. DIRECTV's competitive advantages, which include industry leading HD, interactive, sports and DVR services, were the driving force behind the 22% increase in gross additions to 1.18 million subscribers and the ten-year low monthly churn rate of 1.33%. We're also pleased that the overall credit quality of these new subscribers remains at our high standards and they continue to have a rich appetite for HD and DVR services.

Anonymous said...

The XM + Sirius merger killed the best part of XM: deep and broad playlists, the Powershift radio show, etc.

Convergence is not a good thing for the customer. It is a good thing for the wealthy shareholders. Too many businesses are built on acquisition instead of on a good product.