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3'Oclock High: The TeeVee Biz


There's more to reading sentiment than looking at a stock chart


Some curious and conflicting perceptions about the various players in the MSO (cable guys) and Satellite War for Your TV Dollar seem to be taking form of late. It's worth taking a moment to work through recent developments with the goal of un-earthing investible tidbits.

DirecTV: Underappreciated or Nefarious James-Bond-Bad-Guy Shell Company?

DirecTV (DTV) and its unusual mastermind, Rupert Murdoch, dominate the popular press coverage even as the stock slogs through an 11% drop in 2005 to date. Sanders Morris and Harris analyst Steve "no relation to Jerry" Mather is noting that underperformance today supporting his strong buy rating on the stock.

Mather seems to have had a chance to play with the NDS Group's (NNDS) TIVO replacement DVR, a package to be called DirecTV Plus. The analyst offers that the oft-delayed box is is nearing an October release and provides a viewing experience which is "better than expected", including better pay-per-view functionality, interactivity enabling things like voting for MTV awards and rudimentary games such as Pac-Man.

In an observation which is likely helping TiVo's +5% move today, Mather suggests that DTV will leave the 2-million (plus) DirecTivo boxes in place, focusing on using DirecTV Plus to lure new viewers. The implication is that TiVO will continue to collect monthly charges from DTV through the end of the contract in 2007.

Mather calls the sentiment on DTV's stock "particularly negative" and based on increased competitiveness, high churn and the telco video rollout drawing away customers.

Is the sentiment on DTV really so negative? Of the 9 analysts who released their rankings of DTV to Zack's there are two "Hold" (or equivalent) ratings, 6 "strong buys" and two "overweights".

Perhaps this is the Wall St. version of being particularly harsh but it seems a fairly normal skew for a blue-chipish broadcaster that does a ton of investment banking business.

Away from the Street we have negative coverage of DirecTV only in the same way press coverage of Japanese Industrial Might was unfavorable in the early 1990's. In other words, the criticisms are more of the "Please don't destroy us, powerful new foreign overlord" variety.

Consider, if you will, the artwork in's otherwise-not-great story on Murdoch vs. Roberts.

Not to go all "Liberal Arts Major" guy on you, but here's a good rule of thumb: When an artist depicts one executive as an oversized Fox (I get it), astride a phallic satellite, leering menacingly as he pounces on a competing exec who is depicted as a hen, the "hidden message" of the work is not that the hen is in a position of strength.

I think the Street is miffed with Rupert's DTV stock because Rupert's empire isn't, at the moment, being well-run. DTV missed their first deadline for the roll-out of the NDS box. Churn is up. Customers are confused. Executives are frustrated.

And, in something I have shown tremendous restraint in not mentioning so far (since I said it would happen months ago), DirecTV has lost their top spot for customer satisfaction.

Seems to me that DirecTV's stock is right about where it should be, and where I suspect it will stay (more or less) until the company starts executing again.

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