Liberty's holiday gift could end up DirecTV

Asset swap with News Corp. may come before year's end

NEW YORK -- Liberty Media would benefit from controlling satellite TV giant DirecTV Group because it will add distribution clout to its content businesses, president and CEO Greg Maffei said here Wednesday amid suggestions that a deal with News Corp. could come before year's end.

"We have a host of content assets that don't really have the distribution muscle they used to have" when Liberty chairman John Malone controlled TCI, Maffei said.

In an appearance here at the annual UBS Global Media and Communications Conference, Maffei also said talks with News Corp. about swapping assets for Liberty's stake in News Corp. continue, but News Corp.'s stake in DirecTV is only one asset under discussion. He didn't detail other possibilities.

Maffei spent so much time outlining the benefits of a DirecTV deal that observers concluded this remains the scenario both sides are focusing on.

A News Corp. spokesman declined comment, but one source close to the deal said an announcement might come this year or early in 2007. The Wall Street Journal late Wednesday also reported a transaction could be announced in the coming weeks.

News Corp. president and chief operating officer Peter Chernin previously said a deal could come before 2006 is over, but dodged a question this week about timing (HR 12/5). Asked about the likely timing, Maffei exhibited frustration. "I'll let Peter do the talking for everybody," he said. "That seems to be News' specialty."

Maffei also said Wednesday that if Liberty controlled DirecTV, it would look for partnerships, including with companies it owns, to bring long-awaited broadband services to DirecTV subscribers. For example, the company has a stake in WildBlue, which offers high-speed Internet services in rural markets via satellite.

Maffei also said he expects Liberty would get DirecTV board seats, and his firm would look to increase or lower the 39% stake it would get from News Corp. depending on opportunities. For example, DirecTV shares' strong run-up this year makes an increase in the stake "not an attractive opportunity right now." He added that 25.1% would be all the stake Liberty needs to hold for its purposes.

Maffei also signaled that Liberty likely would increase DirecTV's debt leverage.

Asked if Liberty has an interest in Cablevision Systems' Rainbow Media TV networks, Maffei signaled this was unlikely despite the old friendship between Malone and Cablevision chairman Charles Dolan.

He said it wouldn't help his company to own these networks without more distribution muscle. At the same time, if Liberty won control of DirecTV, a Rainbow deal could be "problematic," he added.

During his prepared remarks, Maffei focused mainly on the recent transformation of Starz, which he said is "indicative of some of the things we're doing" at Liberty to become more of an operating company.

He said many entertainment powerhouses have been suffering from "old-media malaise" amid a changing industry, pointing out executive changes at NBC Universal, job cuts at Disney and the fact that "Viacom has fired a couple of Toms."

Starz does not aim to be a pay TV player anymore, but "an audience aggregator across multiple platforms," Maffei said.

He also touted the recent launch of Overture Films, reiterating its focus on eight to 12 films per year at negative costs of $15 million-$25 million at the most.