A New Direction For DirecTV
(FORTUNE Magazine) – As the new president and CEO of DirecTV (formerly Hughes Electronics), Chase Carey is Rupert Murdoch's lieutenant overseeing News Corp.'s newest jewel. Once part of General Motors, the 12-million-subscriber DirecTV joins Fox Entertainment and BSkyB in News Corp.'s global empire. Carey, a veteran movie and TV executive, recently delivered to Wall Street a three-year plan for DirecTV that includes heavy spending to increase subscriber rolls by 25%. FORTUNE's Adam Lashinsky talked to Carey about satellites, News Corp.'s move to the U.S., and playing phone tag with Murdoch.
You've said that DirecTV will be a "much different company" by year-end. How?
Historically, if you look at [what was Hughes], it's a company that had an engineering background, much of it geared toward government business. It's a company that's operated under a couple of levels of fairly large bureaucracies, both at the corporate level and at the General Motors level. We're looking to turn it into a television business.
You're forecasting a 25% increase in subscribers over the next three years. Are there that many folks left who don't have cable or satellite service?
About 85 million out of 105 million households are paying for pay TV today. And while the market is probably growing a million or two [a year], we really do view the market as being mature in that regard. So the real competition is going to be with cable for the customers who want pay TV.
How will you lure people away from cable?
Cable has to put a box in the home, but then it has to put wires in the ground and big central servers and switching systems in place. We view satellite as more agile and flexible than cable. It's easier for us to launch the next generation of set-top boxes and upgrade them. And that will enable us to drive down costs for things like set-top boxes and software, and really have the scale to be at the forefront of R&D to bring new and exciting features to consumers.
You've also said you need to lower DirecTV's programming costs, and there's been speculation you'll toss ESPN off DirecTV. Can you do that?
I'm not going to comment on any discussion with any specific party like ESPN. But we're going to tackle programming costs, and that includes Fox. Programming costs have been going up at a rate that's not acceptable.
That's tough talk, no? You're putting your parent company on notice.
It's just realistic talk. There are some channels that aren't providing the value we're paying for.
Comcast's bid for Disney is still on the table. Is this a case of Comcast imitating News Corp.'s strategy?
[Hearty laugh.] I will say from a News Corp. perspective that it was certainly a reinforcement of the huge benefits we see in linking distribution and content.
You're a News Corp. board member. Will its decision to move its headquarters to the U.S. mean fewer trips to Australia for you?
News Corp. board meetings have historically been in the U.S., and I already spend enough time traveling between DirecTV offices in New York City and Los Angeles.
How often do you speak to Rupert Murdoch?
It would average out to once a day. He travels too much and too fast to keep up with him.
You recently got a black eye. Would that have anything at all to do with negotiations with ESPN or another programmer?
[ESPN president] George Bodenheimer is a neighbor, and I know him too well. He would never take it out on me that way.