Direct Talk About DirecTV

Rupert Murdoch had just received the phone call that would launch him into the stratosphere: Regulators had O.K.'d his purchase of a controlling stake in DirecTV's satellite service. BusinessWeek's Los Angeles Bureau Chief Ronald Grover interviewed the News Corp. (NWS ) chairman in his Los Angeles office on Dec. 19, 2003, just hours before the official announcement.

How does it feel to finally get the deal?

I'm very happy, of course, but it would have been better if it were a few years ago. Cable wouldn't have made those investments and would have been more vulnerable.

How are you going to win customers away from cable?

To a certain extent, we're going to just give better service -- cable and satellite both have bad reputations for service -- and if we want to get customers, we had better have someone on the phone in 30 seconds rather than 20 minutes. And we will be investing a lot in research and development to get the most advanced technology for our set-top boxes and to get a lot more interactivity.

Will you be giving away set-top boxes for free?

Well, [EchoStar Communications Corp. (DISH ) Chairman] Charlie Ergen is already giving away some of his boxes. We will be matching him. But if we are manufacturing boxes with more features than he is giving, then we will charge something. But we will be subsidizing it to the extent that he does. We can't have him out there with a financially superior offering.

The cable guys say they can offer more services, such as telephony and high-speed data, and that satellite's climb is slowing.

They have already made a huge capital investment, and for whatever reason, the satellite companies are advancing as fast as ever.

Do you intend to undercut cable's prices to start a price war?

We're not going into a price war with anyone. But overall, digital satellite today is getting about $54 a month per customer, and cable is averaging about $66 at the moment. People want digital offerings, but cable is just too expensive.

What about broadband? Cable offers it; satellite can't.

I am inclined to think that broadband will be a commodity. I'm not sure about that, but it's certainly physically possible to get first-class broadband service by satellite.

People genuinely seem to fear you. Why?

Ah, "the megalomaniac who will change the world." There is a degree of paranoia out there. This company has always been a catalyst for change -- Fox News is a catalyst for change. BSkyB was. Someone once told me that there were two crazy people in the media business -- Ted Turner and me -- and now there is only one. And that's not a bad thing, to keep people guessing.

Are people right to now think of you as a digital gatekeeper?

We're a fractional gatekeeper compared with [Comcast (CMCSA ) President] Brian Roberts. There are no satellite [subscribers] in [his company's home of] Philadelphia. He has kept them all out [by denying them Philadelphia sports programming through an FCC loophole]. I would hope one day the FCC would get around to [addressing] that loophole.

Still, in Britain, you forced MTV to lower its rates for your BSkyB service. Will you force U.S. programmers to lower their rates to get carried on DirecTV?

I hope to have good relations and compromise. But they want to give us more and more channels -- and charge us for them -- and we don't have a lot of spectrum. So if they want us to carry one of their channels, they have to promise it will get an audience.

You have said you would use sports as a battering ram. Will Fox TV or the Fox Sports Network bid against ESPN for Sunday Night NFL football when it comes up in 2005?

It is too early to say. I would be happy to leave things as they are, but [the NFL] may try to do something with cable to expand their revenues. To try to take on ESPN would be too expensive. I am not committing myself, but at current prices we are pretty keen to keep what we have.

How long do you intend to run your company?

As long as my brain holds out. My mother is doing pretty well at 95.

Your sons, Lachlan and James, are both in top jobs. Who will succeed you?

They will both learn and develop. And my daughter may be coming back into the company. But the board will decide. I won't be around. I'll probably drop dead on the job.

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