Would Fox just Carey on with vet exec?

His likely return opens door for many questions

Chase Carey
NEW YORK -- The likely return of DirecTV president and CEO Chase Carey to News Corp. could smooth the way for a sale of the satellite TV giant to a telecom powerhouse. And, as if that weren't a big enough repercussion of the move, there are issues of reporting structure and executive shifts to keep tongues wagging for the next several months.

The big question in Hollywood today is whether any of the key film, TV and new-media execs -- Jim Gianopulos and Tom Rothman on the film side, Tony Vinciquerra and Roger Ailes on the TV front and Peter Levinsohn on the new media side -- will eventually report to Carey or will continue, as they have since Peter Chernin announced his exit, to relate directly to Murdoch.

Carey has strong operational and negotiating skills but, at 55, he may want to play a more global or strategic role in the News Corp. fold rather than have direct responsibilities in the L.A.-based film and TV business.

In any case, not only was speculation rampant over in Century City but so too were the rumors flying in El Segundo where the betting on a Carey replacement has aleady started.

Already, the name of Mike Palkovich, exec vp operations at DirecTV, has surfaced as a possible successor.

Then there is the bigger question related to a sale of the satcaster -- a scenario long bruited but recently brushed off againwhen Liberty Media said that it will combine its Liberty Entertainment operation with DirecTV, in which it holds a controlling stake. The transaction, expected to close this year, combines DirecTV with the Game Show Network, FUN Technologies and three regional sports nets that are part of Liberty Entertainment.

Malone, his wife and associated trusts will hold shares entitling them to 24% of DirecTV's total voting power but their economic stake falls to just 3%.

Carey has argued as recently as last week that DirecTV is well positioned to perform strongly without a telecom giant such as AT&T, with which it has a partnership for bundled product sales, or rival Dish Network.

Carey and Malone respect each other and have a working relationship, but Carey is thought to be more fond of his relationship with Murdoch

Malone has lauded DirecTV's strong financial and subscriber performance under Carey's leadership but has at times signaled that a sale to a telecom could make sense down the line.

Meanwhile, Carey said at the time of the Liberty Entertainment deal announcement that DirecTV would have preferred a single class of stock rather than the dual class structure to accommodate Malone's stake, though he argued that the structure aligns the interests of all shareholders and called Malone "a positive force."

Some analysts heavily focused on a potential DirecTV sale in their notes about Carey's potential departure.

"This takes DirecTV one step closer to being sold to AT&T, which would be a significant positive for DirecTV," Collins Stewart analyst Thomas Eagan said. "Mr. Carey was likely a voice to keep DirecTV independent. Should he depart, DirecTV is more vulnerable to a takeover, as the board may be more willing to agree to a deal."

AT&T may be considering buying DirecTV because in 2010, "AT&T will be less able to compete with cable," the analyst added, as cable operators roll out more HD channels and advanced services.

He also argued that Carey has fulfilled the most pressing needs of DirecTV, including putting it on a solid growth track, negotiating the Liberty Entertainment deal and renewing the NFL Sunday Ticket agreement. "The heavy lifting is done," Eagan said.

Similarly, Barclays Capital analyst Vijay Jayant said Carey's farewell would make sense "given Carey's long history with News Corp. and unclear role in the event that DirecTV is sold." If DirecTV were sold to a telecom firm next year, once tax restrictions related to the Liberty Entertainment deal are no longer a hurdle, "we would not expect Carey to stay and run a division of a telecom firm," he added. "Hence, departing now for an attractive position at News Corp. could be the sensible move for him, particularly if he believes that the 'window' to take such a position is more limited."

One challenge to a deal is Carey's employment contract with DirecTV, which runs through the end of 2010. Although there apparently is a one-year noncompete clause, Jayant said the contract, "as we read it, would not prevent him from leaving with 60 days notice and joining News Corp." given that News Corp. doesn't compete in the multichannel TV space in the U.S. and Latin America where DirecTV's operations are focused.

Talks about letting Carey out of his contract early are serious but have not been concluded; Malone could agree to set Carey free in return for some kind of News Corp. concession.

The loss of Carey could be a negative for DirecTV given his strong skill set. But Jayant also said that "the company has a strong bench and operational strength would continue."

Carey joined DirecTV, or what was then known as Hughes Electronics, in late 2003 after working for News Corp. He was co-COO with Chernin -- who is leaving his president and COO role at month's end -- between 1998 and 2002. Carey would take on a key role as vice chairman if an agreement is reached.