Direct Tv Local Channels

What's that up in the sky? It's a bird. It's a plane. It's Rupert Murdoch.

DirecTV, controlled by Australian media baron Murdoch since December, is expanding local channel service in markets that include Baton Rouge. Coming in April to DirecTV customers are local affiliates of CBS, ABC, NBC, Fox, UPN and WB as well as Louisiana Public Broadcasting.

In a pre-emptive strike, Cox Communications has been airing television commercials that portray satellite broadcasting as an inferior service. The ads, which DirecTV and an independent expert say are not true, depict satellite as difficult to install and show service as spotty.

Pushing its own service, Cox is boasting about its exclusive local programs, such as high school sports. DirecTV is countering with its all-digital package and exclusive programming. The satellite company has locked up NFL Sunday Ticket, which airs every NFL game on Sunday, through 2005

The clear winner in the battle for eyeballs is local consumers, who can expect more competition in a market that has been ruled by Cox Communications. "You will be able to pick the television provider who is best for you," said Phillip Swann, a television consultant who runs TVPredictions.com. "If you don't like it, you can switch."

To keep customers from changing distribution channels, each side will not only offer special packages but also interactive features never seen before. Interactivity is likely to include horse race betting via television sets in Baton Rouge by the end of the year, thanks to DirecTV and Murdoch's ownership in the TV Game Network.

Competitor Dish Network is not in the local channels game, though it boasts the lowest prices. Dish Network has no plans to offer local channels in Baton Rouge, a spokesman said.

Air attack

DirecTV is 10 years old and growing. It has more than 12 million subscribers. It could have untold more if it had beamed local channels across the country sooner, said Swann. "They grew despite local channels. No telling how many customers they could have had with local channels."

As it launched satellites, the company--with limited bandwidth available--started broadcasting local channels first in larger markets. Where it didn't offer local stations, customers used antennas or paid for the most basic cable service to receive network affiliates. In Baton Rouge, the cheapest cable service, which has local channels, is roughly $13.

Baton Rouge, not one of the top 50 media markets, is getting local stations because DirecTV is launching another "bird"--satellite, to laymen--this month, said Bob Mercer, company spokesman.

Howard Kadair, owner of electronics retailer Kadair's, expects customers to now line up for DirecTV. "My feeling is that the lack of local channels probably has been the sole reason that satellite services have not exploded here."

How many customers will switch to DirecTV is uncertain. Swann hasn't seen a study on the drift from cable to satellite after local channels are beamed, but there is some anecdotal and statistical data that hints at the numbers. DirecTV's Mercer won't provide details but says he's seen triple-digit increases in new customers in weeks that follow the launch when compared to new connections in the prior year.

SkyTrends, which tracks broadcast satellite customers, reports that 257,500 of Louisiana's 1.95 million TV households were satellite customers last July. That equals a 13 percent market penetration compared to a national average of 16.8 percent. In Colorado, which has local channels and about the same number of TV households as Louisiana, satellite broadcast penetration is 21.4 percent--about one-fourth more than Louisiana.

Murdoch is aiming at 20 million customers by the end of the decade. To get there, DirecTV is planning to ramp up spending on infrastructure and provide steep discounts for its systems, including possibly giving away personal video recorders under the TiVo brand. (Dish already gives away its PVRs). The company also could lower subscriber fees, which are already generally lower than competing cable, said Swann.

DirecTV wants to grab customers by delivering new set-top boxes that let viewers purchase goods at the click of a remote control button and provide new interactive wrinkles, such as letting football fans--a core customer group--choose game angles. Murdoch offers the features in England, just a part of his worldwide satellite broadcasting empire.

Place eyes here

The game for Cox is manifold. It takes shots at DirecTV's service, including what Cox spokeswoman Sharon Kleinpeter calls "ugly" dishes on houses.

And, "We provide better service that is not affected by the weather," she said, staying on the message company advertising is now pushing. DirecTV's Mercer calls those commercials "tired," and Swann of TVPredictions.com backs that take.

"I've seen those ads where they claim whenever it rains or someone jumps up and down that the service goes out," Swann said. "That's nonsense and hysterical. Those commercials are based on fears and not reality."

Cox also promotes itself as local, not only with programming that includes live coverage of Metro Council meetings but also with its civic involvement, which includes plowing some profits back into the community and having 530 local employees. "We are all about community and localism. We consider that our major competitive advantage," Kleinpeter said.

Another competitive lead for Cox is a bundle of Internet and phone service, though DirecTV is wiping out that plus point by partnering with Bell-South for bundled packages.

Ultimately, the one-upmanship, for a while, might favor Cox, especially among early adopters of technology, Swann said. The next frontier is high-definition, and Cox offers local channels in high definition but DirecTV does not.

"You have 7 million homes with HD capabilities that will double in the next 12 months," he said. "It's starting to become a new issue."

HOW'S IT STACK UP?

                          COX             DIRECTV

Exclusive programming  Local sports      NFL Sunday Ticket
Services               TV, net, phone    TV only
Technology             Some digital      All digital
Interactive services   On drawing board  Coming soon

Source: Business Report research

MUKUL VERMA covers technology and commercial real estate. Reach him at mverma@businessreport.com.

COPYRIGHT 2004 Louisiana Business, Inc.
COPYRIGHT 2004 Gale Group

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