DirecTV

DirecTV, LLC.
Formerly
The DirecTV Group, Inc. (2004-2015)
Subsidiary
IndustrySatellite television
PredecessorHughes Electronics
FoundedJune 17, 1994; 24 years ago (1994-06-17) (as DirecTV)[1]
HeadquartersEl Segundo, California, U.S
Areas served
United States, Latin America, the Caribbean
ProductsDirect broadcast satellite, pay television, pay-per-view, internet television
OwnerAT&T (2015-present)
ParentHughes Communications (until 2004)
AT&T Communications (2017-present)
Websitewww.directv.com
A standard DirecTV satellite dish with Dual LNB on a wall brick

DirecTV (stylized as DIRECTV) is an American direct broadcast satellite service provider based in El Segundo, California and is a subsidiary of AT&T. Its satellite service, launched on June 17, 1994, transmits digital satellite television and audio to households in the United States, Latin America and the Caribbean.[2][3] Its primary competitors are Dish Network and cable television providers. On July 24, 2015, after receiving approval from the United States Federal Communications Commission and United States Department of Justice, AT&T acquired DirecTV in a transaction valued at $67.1 billion.[4][5]

DirecTV provides television and audio services to subscribers through satellite transmissions. Services include the equivalent of many local television stations, broadcast television networks, subscription television services, satellite radio services, and private video services. Subscribers have access to hundreds of channels, so its competitors are cable television service and other satellite-based services.[4][5]

Most subscribers use reception antennas which are much smaller than the first generation antennas, which were typically a few yards (meters) across. Advances in antenna technology, including fractal antennas, have allowed a general reduction in antenna size across all industries and applications. Receiving equipment includes a satellite dish, an integrated receiver/decoder and a DirecTV access card, which is necessary to operate the receiver/decoder.[6]

Consumers who purchase DirecTV subscribe to various packages of DirecTV programming for which the subscriber pays a monthly fee. Additional monthly fees may include a protection plan (which provides for repair or replacement of consumer-leased equipment from damages caused by lightning, power surges, floods, etc.), DVR, additional receivers, HD channels, and other premium channel packages. A subscriber also can order pay-per-view and video on demand events and movies. DirecTV contracts with and pays program providers such as cable networks, motion picture distributors, sports leagues, event promoters, and other programming rights holders, for the right to distribute their programming to its subscribers. All programming distributed by DirecTV is delivered to its broadcast centers in Castle Rock, Colorado, and Los Angeles, where it is then digitized and compressed. The resulting signal is encrypted by DirecTV to prevent its unauthorized reception. DirecTV then transmits these signals to several satellites located in geostationary orbit.[6]

As of Q1 2017, DirecTV U.S. had 21 million subscribers (26 million if combined with U-verse) and revenues of $12 billion.

In addition to serving residences, DirecTV offers service to bars, restaurants, hotels, dorms, and hospitals through their DirecTV for business service. The company also offered mobile service for cars, boats, and RVs (DirecTV Mobile) as well as aircraft (DirecTV Airborne) in cooperation with Connexion by Boeing. On November 30, 2016, DirecTV Now, their internet streaming TV service, was launched.[7]

History

Hughes Electronics

Hughes Electronics logo (1985-1990)

In 1953, Howard Hughes created the Howard Hughes Medical Institute (HHMI), to which he transferred full ownership of Hughes Aircraft. Ostensibly created as a non-profit medical research foundation, HHMI was accused of being used by Hughes as a tax shelter.[8] Following Hughes' death in 1976, HHMI was incorporated in 1977, and litigation ensued to determine whether it would be allowed to maintain its interest in Hughes Aircraft.[citation needed] In 1984, the court appointed a new board for HHMI, which proceeded to sell off Hughes Aircraft to General Motors on December 20, 1985, for an estimated $5.1 billion.[9] General Motors then merged Hughes Aircraft with its subsidiary Delco Electronics to create Hughes Electronics Corporation.[citation needed] The new subsidiary was initially composed of four units: Delco Electronics Company, Hughes Aircraft Company, Hughes Space and Communications Company, and Hughes Network Systems.[citation needed]

Stanley E. Hubbard founded United States Satellite Broadcasting (USSB) in 1981 and was a leading proponent for the development of direct-broadcast satellite service in the United States.[citation needed] USSB was awarded five frequencies by the FCC, at the coveted 101-degree west satellite location.[citation needed] Hughes Communications, Inc. was also awarded 27 frequencies at the same 101-degree location.[citation needed] After many years, the technology was developed to enable the building of very high-power satellites, and digital compression (MPEG-2) standards were developed that allowed multiple digital television channels to be sent through each satellite frequency.[citation needed]

Hughes attempted to create a joint venture with NBC, News Corp., and Cablevision in 1990, to launch the first high-power digital television service called Sky Cable.[10] Failing to do so, the company instead created DirecTV as a separate division and secured an agreement with USSB to build and launch the first high-power direct-broadcast satellite system.[citation needed] DirecTV's name is a portmanteau of "direct" and "TV" (as in direct broadcast satellite television).[citation needed] Hughes/DirecTV then turned to Thomson Consumer Electronics (under the RCA, GE, and ProScan brands) to develop the digital satellite system for the service that would be capable of receiving 175 channels on a small 18-inch dish.[citation needed] These dishes utilized a new generation of smaller, lighter receiver dishes based on military technology introduced by the Global Broadcast System, which predated DirecTV's viability by almost ten years.[citation needed] Hughes was awarded the contract to build and launch the new high-powered satellites, and USSB and DirecTV agreed that the new satellites would carry the two separate programming services: USSB and DirecTV.[citation needed]

The USSB and DirecTV programming services were launched on June 17, 1994.[citation needed] Digital Equipment Corporation provided the hardware for DirecTV, Matrixx Marketing (part of Cincinnati Bell) provided customer care via the Matrixx Plus department, and DBS Systems created the billing software.[citation needed] In December 1998, DirecTV acquired USSB for $1.3 billion, and combined the two satellite services.[11] In 1999, DirecTV acquired PrimeStar, a competitor in the satellite television industry, for $1.83 billion, dramatically increasing its share of the satellite television market in the US.[12]

In September 1996, Hughes purchased 70% of PanAmSat for $3 billion.[13] In 1997, GM spun off Delco Electronics from Hughes and transferred it to Delphi Automotive Systems.[14] That same year, Hughes Aircraft was sold to Raytheon for $9.5 billion.[15] Raytheon filed a lawsuit in 1999 accusing Hughes of overstating the value of Hughes Aircraft by $1 billion.[16] A $635.5-million settlement was reached in 2001.[17] In 2000, Hughes Space and Communications was sold to Boeing for $3.75 billion,[18] which it later claimed had also been overvalued by Hughes. Hughes later settled with Boeing for $360 million.[19] These sales left DirecTV, PanAmSat and Hughes Network Systems as the remaining components of Hughes Electronics.

Direct satellite broadcaster were mandated in 1992 to set aside 4% of its channel space for noncommercial educational and informational programming. DirecTV selected C-SPAN, EWTN and the Trinity Broadcasting Network from its current channel lineup plus request additional proposals from other programmers. DirecTV had given PBS Kids, PBS's original application, carriage that did not count against the set aside six weeks before the deadline. DirecTV selected an additional six channels; Clara+Vision, Inspirational Life, NASA TV, PBS YOU, StarNet and WorldLink TV, for the mandate.[20]

In September 2000, GM executives, under pressure from GM's shareholders as a result of its poor performance and the substantially greater market worth of Hughes, authorized Hughes executives to begin seeking buyers.[21] In 2001, News Corporation began negotiations to acquire Hughes Electronics in a deal worth $8 billion, which would allow News Corp. to expand its Sky Global Networks satellite television operations into the United States.[22] Negotiations with News Corp. ultimately failed, and Hughes entered into an agreement on October 28, 2001 to be purchased for $26 billion by EchoStar, owner of Dish Network.[23] However, the deal attracted significant opposition from the Department of Justice and the Federal Communications Commission for antitrust concerns, leading the two companies to withdraw the agreement in December 2002.[24] As part of the merger agreement, EchoStar was required to pay Hughes $600 million for the failure of the merger.[24]

On April 9, 2003, News Corporation agreed to purchase a 34% controlling interest in Hughes, including GM's entire share of the company, for $6.6 billion, subject to SEC approval.[25] As part of the financing for the deal, Liberty Media agreed to take a $500-million option of stock in News Corporation that would be exercised upon the closing of the deal. Liberty, the second-largest shareholder in News Corp. after the Murdoch family with 18%, had originally planned to bid for DirecTV, but opted not to upon the agreement.[25] The FCC voted 3-2 along party lines on December 19, 2003 to approve the deal subject to conditions, forcing News Corp. to agree to arbitration for all disputes with carriers of its media broadcasters, and to provide content through DirecTV neutrally rather than favoring its own networks.[26]

Year Subscribers
1994 320,000
1995 1,200,000
1996 2,300,000
1997 3,301,000
1998 4,458,000
1999 6,679,000
2000 9,554,000
2001 10,218,000
2002 11,181,000
2003 12,290,000
2004 13,000,000
2005 15,000,000
2006 15,950,000
2007 16,830,000
2008 17,620,000
2009 18,081,000
2010 19,200,000
2012 19,900,000
2014 20,265,000

Becoming a standalone entity

In February 2004, Hughes announced its intent to focus solely on its satellite television operations and divest its other interests, renaming itself The DirecTV Group, Inc. on March 16, 2004 and changing its ticker symbol from "HS" to "DTV".[27] In April of that year, it sold its controlling interest in PanAmSat to a private consortium led by Kohlberg Kravis Roberts for $3.53 billion.[28] On April 22, 2005, DirecTV spun off Hughes Network Systems into a separate entity and sold 50% of the new entity to SkyTerra, acquiring $157.4 million in the transaction.[29] In January 2006, DirecTV sold its remaining 50% share in Hughes Network Systems to SkyTerra for $100 million.[30] The sale effectively ended DirecTV's 20-year existence through Hughes Electronics as a technology conglomerate, leaving it solely with its satellite television services.

In 2004, DirecTV abandoned the Mexican market, though it maintained 41% ownership of SKY México.[31] On November 15, 2005, DirecTV stopped carrying Music Choice audio-only channels, replacing it with 73 channels of XM Satellite Radio. In 2007, DirecTV abandoned the Brazilian market, with the customers being migrated to the 74% DirecTV-owned Brazilian affiliate of SKY Brasil.[31] In 2010, DirecTV increased its stake in Sky Brasil to 93%.

Expansion

DirecTV logo 2004-2011. The "D" symbol was used in some capacity from 1990-2015. Still used as a secondary logo.

On January 9, 2007, DirecTV announced they would introduce up to 100 national HD channels during 2007, all of which would be MPEG-4 encoded.[32] On October 3, 2008, DirecTV announced that it would offer HD local channels in 121 markets by year end.[33]

In December 2006, News Corporation announced its intention to transfer its 38.5% controlling interest in The DirecTV Group, four regional Fox Sports Net stations and $550 million cash to Liberty Media in exchange for Liberty's 19% interest in News Corp., giving the Murdoch family tighter control of the latter firm.[34] The deal, valued at $11 billion, was approved by News Corp. shareholders in April 2007.[35] Following revisions that increased the cash offer to $625 million in exchange for a reduction of Liberty's divested interest in News Corp. to 16%, the swap was completed on February 27, 2008 following Federal Communications Commission (FCC) approval.[36] One condition placed by the FCC on the deal was that Liberty divest either its DirecTV operations or Liberty Global's cable operations in Puerto Rico, which Liberty fulfilled by placing DirecTV's Puerto Rican operations in a trust.[37]

On May 4, 2009, Liberty announced that it would split off Liberty Entertainment, Inc., a subsidiary of Liberty owning the four FSN channels acquired under the swap with News Corp. and Liberty's 65% interest in Game Show Network, into a separate company to be merged with The DirecTV Group, reducing Liberty owner John Malone's stake in DirecTV to 24%.[38] The merger was completed on November 19, 2009, with The DirecTV Group and Liberty Entertainment becoming subsidiaries of a new company named DirecTV.[39] On June 16, 2010, Malone exchanged his preferred stock in DirecTV with equivalent amounts of common stock, reducing his voting interest in the company from 24% to 3%, with Malone resigning as Chairman and ending his managerial role at DirecTV.[40]

On February 9, 2010, DirecTV dropped Sirius XM Radio and replaced the channel lineup with Sonic Tap audio stations.[41] On April 1, 2011, DirecTV announced it would be renaming its three FSN channels as Root Sports, though the channels are still affiliated with FSN.[42]

Acquisitions

  • On December 13, 2007, DirecTV purchased most of the assets of ReplayTV from D&M Holdings.[43]
  • In June 2013, DirecTV purchased Pennsylvania-based LifeShield, a maker of wireless home security systems, with plans to market the systems to its customers.[44]

Subsidiary of AT&T (2015–present)

DirecTV transitional logo following purchase by AT&T

On May 18, 2014, AT&T announced that it would purchase DirecTV.[45][46] In the deal, which had been approved by boards of both companies, DirecTV stockholders received $95 a share in cash and stock, valuing the deal at $48.5 billion. Including assumed debt, the total purchase price was about $67.1 billion. The deal was aimed at increasing AT&T's market share in the pay-TV sector; its existing U-verse brand had modest market share (5.7 million users compared to DirecTV's 20 million US customers as of 2014) and operates in only 22 states. It also gave AT&T access to fast-growing Latin American markets, where DirecTV has 18 million subscribers.

The deal faced regulatory approval by the FCC, the U.S. Department of Justice, and some Latin American governments. It was expected to take about 12 months to complete.[47] The deal was also contingent on the combined company's ability to renew its exclusive rights to carry the NFL Sunday Ticket service beyond the 2015 NFL season on "substantially the terms discussed between the parties."[48]

The acquisition was officially approved by the FCC on July 24, 2015; it is subject to conditions for four years, requiring AT&T to expand its fiberoptic broadband service to additional customers, public libraries, and schools, and to "refrain from imposing discriminatory usage-based allowances or other discriminatory retail terms and conditions on its broadband internet service".[49][50]

At an analyst meeting in August 2015, AT&T announced plans to converge DirecTV and its IPTV-based U-verse service around a common "home entertainment gateway" platform based upon DirecTV hardware, with "very thin hardware profiles". AT&T Entertainment and Internet Services CEO John Stankey explained that the new platform would offer "single truck roll installation for multiple products, live local streaming, improved content portability, over-the-top integration for mobile broadband, and user interface re-engineering. All of these are steps that are planned to deliver that premium effortless entertainment experience anywhere."[51][52][53]

In September 2015, AT&T selected Ericsson to be hardware provider for the new platform, and hired former Sirius XM, Cisco Systems and Microsoft executive VP Enrique Rodriguez to be vice president and CTO of the AT&T Entertainment and Internet Services division.[54][55]

On December 2, 2015, AT&T announced plans to phase out the DirecTV brand as part of the introduction of the new platform, which will be marketed as AT&T Entertainment. The company also adopted a new logo, replacing its previous emblem with that of AT&T.[56][57][58]

In February 2016, Bloomberg reported that AT&T was in the process of phasing out the U-verse IPTV service by encouraging new customers to purchase DirecTV satellite service instead, and by ending the production of new set-top boxes for the service. An AT&T spokesperson denied that U-verse was being shut down, and explained that the company was "leading its video marketing approach with DirecTV" to "realize the many benefits" of the purchase, but would still recommend U-verse TV if it better-suited a customer's needs. AT&T CFO John Stephens had also previously stated that DirecTV's larger subscriber base as a national service gave the service a higher degree of leverage in negotiating carriage deals, thus resulting in lower content costs.[59][60][61]

On October 20, 2016, it was reported that AT&T was in talks to acquire Time Warner, in an effort to increase its media holdings.[62][63][64] On October 22, 2016, AT&T reached a deal to buy Time Warner for over $80 billion. If approved by federal regulators, the merger would bring DirecTV under the same umbrella as HBO, Turner Broadcasting System and the Warner Bros. studio.[65][66]The acquisition was completed on June 14, 2018.

On April 25, 2017, it was reported that AT&T dropped over 230,000 U-verse subscribers.[67][68]

On July 13, 2017, it was reported that AT&T is going to introduce a cloud-based DVR streaming service as part of its effort to create a unified platform across DirecTV and its DirecTV Now streaming service, with U-verse to be added soon.[69][70][71]

On September 12, 2017, it was reported that AT&T is planning to launch a brand new cable TV-like service for delivery over-the-top over its own or a competitor's broadband network sometime next year.[72]

Because of the merger with Time Warner, AT&T plans to sell DirecTV Pan-American and Sky Brasil for about US$8.0 billion, while keeping their share in Sky Mexico.[73]

On February 10, 2018, Sonic Tap was replaced by Music Choice which was originally on the service until November 15, 2005.

On March 13, 2018, it was reported that AT&T has filed a trademark for "AT&T TV" with the U.S. Patent & Trademark Office.[74][75][76]

DirecTV Now

On March 1, 2016, AT&T announced plans for several DirecTV-branded over-the-top services, including DirecTV Now—a contract-free over-the-top internet television service, DirecTV Mobile—a service which will offer "premium video and made for digital content" for phones, and DirecTV Preview, an ad-supported service featuring content from Audience Network, Otter Media, and other partners.[77][78][79]

DirecTV Now launched on November 30, 2016, and is directly competing against Sling TV and PlayStation Vue. AT&T CEO Randall Stephenson stated of the service that "there is a huge customer base out there that we are convinced, while they don't subscribe to a bundle of premium content today, at the right price point [delivered] over-the-top, they will."[80][81]

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