Direc TV - History

History

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. After Hughes' death in 1976, litigation ensued as to whether HHMI would be allowed to maintain its interest in Hughes Aircraft, which had been incorporated in 1977 following Hughes' death. 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 $5.2 billion. General Motors then merged Hughes Aircraft with its subsidiary Delco Electronics to create Hughes Electronics Corporation. The new subsidiary was initially composed of four units: Delco Electronics Company, Hughes Aircraft Company, Hughes Space and Communications Company, and Hughes Network Systems.

Stanley S. 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. USSB was awarded 5 frequencies at the coveted 101 degree west satellite location by the FCC. Hughes Communications, Inc. was also awarded 27 frequencies at the same 101 degree location. After waiting many years, the technology evolved 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.

After Hughes failed to complete a joint venture with NBC, News Corp., and Cablevision, in 1990, to launch the first high power digital television service called Sky Cable, the company created DirecTV as a separate division and secured an agreement with USSB to build and launch the first high power direct broadcast satellite system. DirecTV's name is a portmanteau of "direct" and "TV" (as in direct broadcast satellite television). Hughes/DirecTV then turned to Thomson Consumer Electronics (under the RCA brand) to develop the digital satellite system for the service that would be capable of receiving 175 channels on a small 18-inch dish. 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 10 years. 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.

On June 17, 1994, the USSB and DirecTV programming services were launched. 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. In December 1998, DirecTV acquired USSB for $1.3 billion and combined the two satellite services. 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.

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

In September 2000, GM executives, under pressure from its shareholders as a result of GM's poor performance and the substantially greater market worth of Hughes, authorized Hughes executives to begin seeking buyers. 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. 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. However, the deal attracted significant opposition from the Department of Justice and the Federal Communications Commission due to antitrust concerns, leading the two companies to withdraw the agreement in December 2002. As part of the merger agreement, EchoStar was required to pay Hughes $600 million due to the failure of the merger.

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. 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. The SEC 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.

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". 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. On April 22, 2005, DirecTV spun off Hughes Network Solutions into a separate entity and sold 50% of the new entity to SkyTerra, acquiring $157.4 million in the transaction. In January 2006, DirecTV sold its remaining 50% share in Hughes Network Solutions to SkyTerra for $100 million. 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 Mexico. 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. In 2010, DirecTV increased its stake in Sky Brazil to 93%.

On January 9, 2007, DirecTV announced that they would introduce up to 100 national HD channels during 2007, all of which would be MPEG-4 encoded. On October 15, 2007, DirecTV announced that they had 70 national high-definition channels available, with up to 100 coming by year end. On October 3, 2008, DirecTV announced that it would offer HD local channels in 121 markets by year-end.

On December 13, 2007, DirecTV purchases most of the assets of ReplayTV from D&M Holdings. In August 2009 DirecTV acquired Home Services Provider Connect Television Inc., increasing its workforce by more than a thousand employees.

In December 2006, News Corporation announced its intention to transfer its 38.5% controlling interest in The DirecTV Group, three 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. The deal, valued at $11 billion, was approved by News Corp. shareholders in April 2007. 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 FCC approval. 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.

On May 4, 2009, Liberty announced that it would split off Liberty Entertainment, Inc., a subsidiary of Liberty owning the three FSN channels acquired under the swap with News Corp. and Liberty's 65% interest in GSN, into a separate company that would merge with The DirecTV Group, reducing Liberty owner John Malone's stake in DirecTV to 24%. The merger was completed on November 19, 2009, with The DirecTV Group and Liberty Entertainment becoming subsidiaries of a new company named DirecTV. 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.

On Feb 9, 2010, DirecTV dropped Sirius XM Radio and replaced the channel lineup with Sonic Tap audio stations. 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.