DirecTV could also deploy ad skip technology

Mon Jun 11, 2012 6:31pm EDT

New York, June 11 - DirecTV Group (DTV.O), the largest U.S. satellite TV operator, could deploy technology that would enable its millions of subscribers to automatically skip television advertising, its top executive said on Monday.

Mike White, chief executive of DirecTV, said his company bought rights to the technology from a company called Replay TV nearly five years ago but has not seen any need to make it available to customers.

"We haven't chosen to use it. It's not clear to me there's a raging demand from consumers for it," said White, speaking at the Reuters Global Media and Technology Summit in New York on Monday.

Similar ad skipping technology has become the focal point of several lawsuits and a countersuit filed last month pitting DirecTV rival Dish Network Corp (DISH.O) against CBS Corp (CBS.N), News Corp's (NWSA.O) Fox, Comcast Corp's (CMCSA.O) NBC Universal and other major media companies.

White said his company will keep an eye on the outcome of the legal action between the companies as well as consumer adoption of the technology.

Dish Chairman Charlie Ergen, who controls the company, is using the threat of the ad skipping technology to gain negotiating leverage in discussions over carriage fees with broadcasters, analysts.

Distributors like DirecTV and Dish regularly complain about the above-inflation cost increases they are charged by their programming partners.

One way for the two satellite distributors to counter rising costs would be to merge to give them more leverage to negotiate lower prices from programmers.

Industry observers have long speculated that DirecTV and Dish would eventually combine even though a proposed merger ran into regulatory hurdles more than a decade ago. White said a merger now would make sense given the increased competition in the marketplace since the last merger attempt.

"There's a strategic logic and synergies from a combination. It was tried 10 years ago and vetoed by a Republican administration. It would struggle to get regulatory approval today," said White, who worked for Republican Presidential candidate Mitt Romney at Bain & Co in the early 1980s.

DirecTV sees consumer-facing technology as an important differentiator in competition with Dish and rival cable operators. It is also working on launching voice-activated remote controls through the Apple's (AAPL.O) iPhone and Google's (GOOG.O) Android platforms, White said.

The technology, currently going through its research and development process, would allow DirecTV customers to switch channels and search for shows by speaking into an app on their phone.

Another way DirecTV attempts to differentiate itself is through premium sports programming, in particular its exclusive National Football League Sunday Ticket package of games.

DirecTV for the first time is offering two tiers of the NFL Sunday ticket package, which allows viewers to watch football games outside their local markets on game day. The cheaper package, priced at $199, will not offer mobile services or the Redzone highlights channel offered to customers paying for a $299 premium package.

The two versions of the package are intended to entice a larger portion of subscribers to renew the free one-year Sunday Ticket subscriptions DirecTV offered as a promotion to new customers last year.

The marketing around Sunday Ticket will ramp up in July around the start of NFL training camps. But White said the company expects to "do way better than we would have done with the old strategy," which saw fewer than 50,000 NFL Sunday ticket customers convert to paying customers.

"Anything better than 50,000 out of 1,000,000 beats what we've done before," White said.

(Editing by Peter Lauria and Steve Orlofsky)