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10/07/2005 Entry: "DirecTV DVR (without Tivo) debuts Monday October 10, 2005"

Or so says the New York Times:

DirecTV, the satellite television operator, is introducing a $30 million advertising campaign on Monday to promote its highly anticipated digital video recorder.

The campaign, created by the New York office of BBDO Worldwide, is DirecTV's first widespread public effort to distance itself from Tivo. Of DirecTV's 14.7 million customers, 2.3 million now subscribe to Tivo. DirecTV, which pays Tivo a monthly fee of $1.13 per Tivo subscriber, hopes those users will switch to its own service.

The software for the new service is provided by NDS, a subsidiary of the News Corporation, which also owns a controlling interest in DirecTV.

DirecTV's standard DVR, originally set to be released this past June, will be introduced in late October, and another model featuring high-definition service will be introduced in mid-2006. The standard DVR will feature up to 100 hours of recordable space, compared with Tivo's 70 hours.

DirecTV will continue to support the Tivo service without marketing it, and both services will be priced at $5.99 a month. The company's current contract with Tivo is set to expire in early 2007. DirecTV has not said if it will continue the contract after that.

Bruce Leichtman, a media analyst based in Durham, N.H., said of DirecTV, "They're doing this for the bottom line, to save over $1 per Tivo subscriber per month."

Another motive for the new service, according to Laura Behrens, a media analyst for Gartner, is the desire of News Corporation's chairman and chief executive, Rupert Murdoch, to "have his companies work for his companies."

"It's been an important strategic goal ever since he took over DirecTV."

Eric Shanks, a senior vice president of DirecTV, said the company viewed the introduction of its own DVR as a kind of "silver bullet" to "attract, satisfy and addict customers."

"The longer someone stays with us, the less we have to spend to get new customers. It costs us $650 - for hardware, installation and marketing - to get one subscriber, so we prefer keeping subscribers as long as we can so we don't have to spend that kind of money to get new ones."

Yet another factor is increased competition from cable companies. Many of them also offer DVR service; in fact, some, including the No. 1 cable operator, Comcast, and the No. 6 cable operator, Cablevision, recently made a deal to offer their subscribers Tivo's DVR.

"Cable operators are trying to focus consumers' attention on buying video with data or video with data and voice, and the Bells are trying to get into video to do the same thing," said Douglas Shapiro, a media analyst with Banc of America Securities. Since satellite providers can offer only one of these three services - video - DirecTV's strategy must be to "offer the best possible video product it can," he said.

The new ad campaign strives to explain the benefits of DirecTV's new DVR service in language easily understood by people who are not early adopters of technology, said Tracy Devine, vice president for advertising at DirecTV.

"We've taken everyday real situations, and are balancing people's passion for TV with their passion for their families and other things in their lives," said Al Merrin, vice chairman and executive creative director of the New York office of BBDO, which is a unit of the Omnicom Group.

To that end, a print ad shows the roof of a house against a starry night sky; one arrow in the sky points up to the DirecTV satellite that "broadcasts the amazing hole in one" of a golf game while another arrow points down to the DirecTV DVR in the house that "lets you watch it over and over without missing the next hole." The ad also describes features including the ability to record a whole season of shows, and to pause and rewind live TV.

One TV spot depicts a child asking his father, who is watching a football game on TV, to read to him; the father can do this and record the game simultaneously, thanks to his DVR. In another spot, a teacher asks a student to name her favorite person; the student says it is her "daddy, because he lets me watch cartoons all the time, even during the game."

The tagline on all the advertising is "Somebody up there loves you, DirecTV."

The campaign is running on network and cable television on shows like "Desperate Housewives," "CSI: NY" and "SportsCenter," and in magazines like Entertainment Weekly, Men's Journal and Cargo. Ads will also run on radio and in newspapers in the Top 20 markets in the United States.

DirecTV, which is based in El Segundo, Calif., plans to spend $30 million on the DVR campaign in the fourth quarter. According to TNS Media Intelligence, the company's advertising expenditures have increased annually since 2001, growing from $175 million that year to $237 million last year.

Media industry observers had mixed reactions to the campaign. Mr. Leichtman, the media analyst in New Hampshire, said the TV spots resemble previous TV advertising for DVR's by Time Warner Cable and others. He also said that the campaign seemed to try too hard. "What people like most about DVR's is that they're an easier way to record programs," he said. "They're trying to explain too much."

Ms. Behrens of the Gartner Group said "a lot of factors argue in the campaign's favor."

"DirecTV is doing more marketing and it's been quiet for a while. Consumers will buy as high in the line as they can afford. DirecTV will stop marketing the Tivo box and drive new subscribers to its model. And it's the fourth quarter, when people buy electronics for the holidays."

One factor that could affect DirecTV is a suit that Tivo has filed against EchoStar Communications, which offers its own DVR service. Tivo claims EchoStar's DVR infringes on its patents.

The judge hearing the case issued a preliminary ruling in August that Tivo has said it believes supports its position; the trial begins later this month. Should Tivo win, that could set a precedent for future DVR patent infringement suits.

Edward Lichty, vice president for corporate development at Tivo, said that "if we believed the NDS product violated Tivo's intellectual property, one course of action we would have would be to sue NDS and possibly DirecTV."

"I imagine the lawyers for DirecTV are paying close attention to what happens with the EchoStar case."

Josh Bernoff, an analyst with Forrester Research, predicted that if Tivo won the EchoStar suit, "it will go after DirecTV."

"The most likely outcome would be payments to Tivo for every DirecTV unit shipped. They could end up getting almost as much money as they do now."

Both DirecTV and EchoStar declined to comment on the suit.