EchoStar Communications may face a less aggressive competitor in a DirecTV controlled by Liberty Media Corp., analysts say.
A deal in which Liberty Media swaps its 19 percent stake in News Corp. for controlling interest of leading satellite-television company DirecTV is imminent, according to news reports this week.
EchoStar, controlled by Charlie Ergen, is the nation’s second-largest satellite- TV provider, with 12.8 million subscribers. Like Liberty Media, EchoStar is based in Douglas County. News Corp.’s Rupert Murdoch controls Fox networks, in addition to DirecTV, which has 15.5 million subscribers.
“On the margins, this takes some of the competitive pressures off of Ergen,” said Kaufman Bros. analyst Todd Mitchell. “To a certain extent, when Rupert was negotiating with EchoStar over other content properties, he was able to stick it to EchoStar.”
EchoStar spokeswoman Kathie Gonzalez said the company had no comment. No one from Liberty or DirecTV was commenting Thursday either.
When Murdoch gained control of DirecTV in 2003, the El Segundo, Calif.- based company went head-to-head with EchoStar, competing for both high-end and low-end customers. Before that, DirecTV had played the high-end role while letting EchoStar play the value role, said Bruce Leichtman, president and principal analyst for Leichtman Research Group.
“Murdoch ran around willy-nilly trying to get subscribers,” he said. “I think (DirecTV) will be less aggressive on the value side of things, which has always been EchoStar’s calling card.”
A DirecTV free from News Corp. and Fox influence may help Ergen more effectively negotiate programming deals.
“It’s likely he won’t have the same issues and DirecTV won’t be as troublesome as it was with Murdoch,” said Jimmy Schaeffler, senior multichannel analyst for the Carmel Group. “Distant- network signals – that wouldn’t have been an issue.”
If DirecTV were owned by Liberty Media months ago, 900,000 Dish Network customers might still have their distant-network signals.
EchoStar lost a court battle regarding the out-of-area broadcast channels its customers were receiving, despite reaching a settlement with NBC, CBS and ABC. Fox refused to agree to the deal, and subsequently, EchoStar customers had their distant-network signals shut off last week.
“Basically, Murdoch withheld those Fox stations from Ergen,” Mitchell said. “But it really allowed DirecTV to go after those subscribers.”
Ultimately, a DirecTV controlled by Liberty Media raises speculation that John Malone, who controls Liberty and its various media holdings such as the QVC home-shopping network and Starz cable-TV network, may seek to merge the satellite company with EchoStar.
Federal regulators shot down Ergen’s bid to buy the DirecTV satellite business from Hughes Electronics in 2002.
“I say it means Ergen gets closer to what he wanted four years ago, which is the efficiencies and economies of scale of one (satellite) provider,” Schaeffler said. “Ergen may end up running that or making a lot of money. One way or another, he benefits.”
Staff writer Kimberly S. Johnson can be reached at 303-954-1088 or kjohnson@ denverpost.com.
