Telcos ‘Natural Partner’ for DirecTV, Libert CEO Says

Given “the scale over the long term I think the most natural partners are probably the telcos because their video offerings are unlikely to be competitive with what satellite or cable can offer on a ubiquitous basis,” Maffei said. AT&T recently re-signed with DirecTV to resell its service starting in February in 22 states including the former BellSouth territory. While News Corp. and Time Warner Entertainment sold and spun off DirecTV and Time Warner Cable, respectively, there is “logic in putting the content and distribution together, but the logic isn’t there today,” Maffei said.

Meanwhile, Liberty Media is pressing ahead with plans for its Liberty Entertainment unit, with the “preferred path” being splitting it off. Liberty Entertainment owns pay-TV channel Starz Entertainment and 53 percent of DirecTV. At the same time, Liberty isn’t ruling out combining tracking stocks Liberty Interactive, Liberty Capital and Liberty Entertainment under the Liberty Media banner, Maffei said.

While Liberty announced proposed split-off plans in September, the downturn in the U.S. economy has “depressed” market capitalizations, raising “issues of fairness” to Liberty Capital and Liberty Interactive stockholders, Maffei said. “We want to make sure that we are fair to all asset holders and not over-levering any piece” of the business, he said. DirecTV has a $24 billion market capitalization, while Liberty Entertainment is valued around $6 billion.

John Malone, who runs Liberty Media, earlier split the company’s stock into three tracking stocks tied to various assets. Liberty Interactive owns QVC and similar businesses, while Liberty Capital includes stakes in Time Warner and Sprint Nextel. While Liberty and DirecTV CEO Chase Carey would like to complete the split off “as soon as possible, there is no time frame” the companies are working with, Maffei said. Liberty’s voting stake in DirecTV is 47.9 percent and Carey is “reluctant” to give Malone voting control of the company for no premium, Maffei said. “Independent directors are rightly going to ask why are we doing that.”

Since Liberty Media bought a majority of DirecTV from News Corp. earlier this year, the satellite operator’s partnership with Liberty Entertainment unit and satellite broadband operator Wild Blue has improved, Maffei said. Wild Blue, with about 330,000 subscribers who buy plans starting with a $49 monthly fee for a 500 kbps download speed, also has resale agreements with AT&T and Dish Networks. “DirecTV was less aggressive than Dish in terms of bundling and aggressively marketing” Wild Blue services, but “now it’s really coming on and that relationship as a partnership has grown,” Maffei said.

Liberty Media also would consider buying Cablevision’s Rainbow Media, if rumors of that unit being put up for sale prove true, Maffei said. Rainbow, which owns the American Movie Classics and Independent Film Channels, would complement Liberty’s related businesses, including Starz, he said.

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Windstream will likely end sales of TiVo’s DVR service, about a year after signing a distribution agreement, Chief Financial Officer Brett Whittington told us. While packaging TiVo with Windstream broadband and Dish Networks seemed like a good fit, the company’s sales representatives weren’t sure “when to pitch it,” he said. Whittington declined to disclose how many TiVo DVRs Windstream has sold. The DVRs were being sold for about $100 plus a $15 to $20 monthly fee, he said. “The upfront price requirements and the ongoing monthly obligation have been an impediment to that product really being successful for us,” Whittington said. “People are really price sensitive.” Windstream had 251,700 customers getting Dish Networks on Sept. 30, up from 177,500 a year earlier, having added 21,000 net subscribers in Q3, Whittington said. Dish is bundled in a triple play with broadband and telephone services, he said. Windstream annual recurring revenue from the Dish deal for billing and collection costs is “just under” $30 million, Whittington said. Windstream also gets an undisclosed cut of the Dish activation fee. Windstream had 962,000 DSL customers on Sept. 30, about 22 percent of which get maximum download speeds of 10 to 12 Mbps. About 60 percent of Windstream’s DSL customers have 3 Mbps or faster downloads, he said.

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Discovery Communications folded its Discovery HD Theater and Turbo Media into its emerging networks group as it put control of them under a single executive, company officials said. Emerging Networks is led by Clark Bunting, while Discovery HD Theater and Turbo Media were directed by 16-year Discovery veteran Clint Stinchcomb, who resigned. “It allows us to more easily use our library and have one person looking at that as opposed to having several people,” CEO David Zaslav said. Emerging networks is an umbrella group for Discovery’s 7 HD channels and is designed to “drive the value” of “important real estate for us,” Zaslav said. Discovery Channel, Discovery Science, The Learning Channel, Animal Planet and Planet Green are all delivered in HD. Discovery HD Theater, which launched in 2003, has 20 million subscribers, Zaslav said. The Discovery Health channel, which is being renamed the Oprah Winfrey Network as part of a joint venture with Harpo Productions, will also be broadcast in HD when it debuts in late 2009, Zaslav said. Discovery will contribute the first $100 million to OWN and Winfrey will be chairman of the network. Winfrey also is contributing Oprah.com to the venture. Discovery is filming most programs in HD since the production cost gap with SD is “pretty small,” Zaslav said. Discovery also has seen a turnaround at TLC since installing new management after ratings fell 30 percent July, Zaslav said. The ratings fell another five percent in August, but increased in “the double- digits” in October and November as the channel returned to “middle America,” family values-type fare, Zaslav said. Previous management was a “very L.A. entertainment programming group” that added singing and dancing contests which didn’t sit well with TLC’s audience, Zaslav said. While Discovery recently purchased Howstuffworks.com, it’s not looking for additional acquisitions, Zaslav said. “We've got a good footprint in digital.”