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DirecTV Exec Steps Down

WWW- The president of DirecTV abruptly resigned Monday, a little more than a year after he was handpicked for the job by News Corp. Chairman Rupert Murdoch in the wake of his takeover of the satellite TV leader.

DirecTV executives said no replacement would be named for Mitchell Stern, who had been commuting weekly between New York and the company’s El Segundo headquarters. Instead, sources said, the company would be run by DirecTV Group Inc. Chief Executive Chase Carey and two other News Corp. executives who have yet to be named.

But one of those is expected to be David Hill, chairman of Fox Sports Television Group, who has won wide praise for his creative instincts. He is credited with inventing such mainstays as the yellow first-down line in pro football games and the fixed scoreboard at the bottom of the TV screen. Hill will retain his position at Fox Sports, sources said.

Sources said Murdoch had become frustrated that DirecTV was not developing programming innovations or new channels as it battled with cable operators for subscribers.

In bidding farewell to the troops at DirecTV on Monday, Stern said that he believed the company had a bright future but that his bi-coastal life had taken its toll on him and his family.

Neither DirecTV nor News Corp. would comment on future personnel changes. Hill was in Europe on Monday and did not return phone calls. Stern also could not be reached.

Stern had been considered one of Murdoch’s most trusted lieutenants, helping build News Corp.’s TV station group into the company’s most profitable unit before he became president of DirecTV in December 2003.

But sources said that in recent months he had increasingly clashed with his boss, Carey, mostly over management style and strategy. Those conflicts seemed to escalate after Carey had less to do after selling off all but the company’s core satellite TV operations. Among the assets he sold were equity interests in XM Satellite Radio Inc. and TiVo Inc., as well as DirecTV’s PanAmSat subsidiary and a satellite manufacturing group.

“Having sold all the other assets, DirecTV had become a duplicative, top-heavy structure,” said analyst Craig Moffett of Stanford Bernstein & Co.

Stern is the latest top executive to leave DirecTV. Three others have resigned in the last month. In addition, Eddy Hartenstein, who launched DirecTV as part of General Motors Corp., resigned as vice chairman late last year, telling associates there was now little role for him.

The management changes at DirecTV come at a time when the company faces heated, head-to-head competition with cable challengers – and rising costs to gain a bigger share of the market.

Profit margins have sunk to 6% while large cable companies are averaging about 40%.

Analysts estimate that DirecTV is adding subscribers at an average rate of about 400,000 every quarter, up from an average of 150,000 a quarter during GM’s regime. But the cost of signing them up has increased significantly.

“The going rate is now four rooms of free equipment, free installation and sometimes months of free programming,” Moffett said.

The cost of keeping customers also has skyrocketed, doubling to $1 billion in 2004, said Aryeh Bourkoff, an analyst at UBS Warburg.

Analysts expect that DirecTV’s growth could begin to taper as cable shifts its spending from developing infrastructure to attracting new customers with new services.



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