Microsoft puts $3 Billion in DirecTV
05/07/2001 9:44:57 AM MDT Albuquerque, Nm
By Dustin D. Brand; Owner AMO
Microsoft has plenty of money to spend, it's good they're putting it in the right places.
For Rupert Murdoch, the purchase of DirecTV from General Motors would make perfect sense. By adding North America to his holdings in Europe and Asia, he would complete his long-sought global satellite TV empire. But why is Microsoft ready to throw a reported $3 billion in cash into this deal? The set-top software of course.
So when Murdoch went to Detroit earlier this month to persuade the GM board to move ahead with an agreement, he brought along the formidable Microsoft CEO, Steve Ballmer, to help sell it in person. Sure enough, last week GM opened formal negotiations to sell its Hughes Electronics subsidiary, which owns DirecTV, to Murdoch's News Corp.
Ballmer painted the software story. Once upon a time, in a time not that far away, TV's had no need for software. Everyday that goes by now, software is needed in places it wasn't before, both broadcast signals and two-way data services flowing between the Internet and the "box" will be digital. Can you imagine using your TV as to download music, bet on an online auction, or play a game on TV while others play with you with you being the players? That time is now.
To get its TV software into the living room, Microsoft has invested heavily - about $11 billion - in cable companies worldwide since 1997. But much of that investment has yet to pay off. Two years ago, Microsoft sank $5 billion into AT&T stock in exchange for a commitment to put its software in 10 million TV set-top boxes. Not one has been deployed yet. But it will ring true as a solid investment when HDTV kicks into high gear in the years to come, not to mention Flat Panel Displays. FPD's alone bring more depth and realizm to displays in general.
That's where DirecTV comes in. Satellite is not only quicker to install, but it also lends itself to faster adoption of high-tech services. Cable companies have captive, often disgruntled audiences, but satellite providers must draw consumers into retail stores to buy their dishes. Those customers may be more willing than upset cable subscribers to sample premium services. It's no accident that satellite has led the adoption of both digital broadcast TV and interactive services like Microsoft's recent UltimateTV for DirecTV subscribers.
For the moment, DirecTV has only 10 million U.S. subscribers. But based on Murdoch's current success in Britain - where a fifth of households now subscribe to his BskyB satellite network - he sees vast potential. And Microsoft plans on being there.
This October, Microsoft is also unveiling their XBOX gaming platform.
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