They hired a soda guy? To be Chief Executive Officer of
DirecTV? Did I read that right?
I did. And so did you. John Malone, the visionary behind
the
Liberty Media (Nasdaq: LMDIA) conglomerate,
selected Michael White as CEO of
DirecTV (NYSE: DTV). White is an outstanding
executive, having had 20 years of superior results while at
PepsiCo (NYSE: PEP). Most recently, he had
planned to retire as CEO of PepsiCo International, but he's
trading in his fizzies for satellite beams.
There are likely many reasons as to why Mr. White was
specifically chosen. There's no doubt that politics played a
role, given that Liberty CEO Greg Maffei was also up for the
job, along with other DirecTV executives. In fact, it's a bit
of a mystery that an insider wasn't selected.
Which means there's more to the story. As an investor, you
must look at Mr. White's credentials and where he came from
to make sense of the move. Mr. White came from Pepsi which,
as we know, is really nothing more than a company built
around the operations and selling of brown, sugary water with
bubbles. Taste test or not, Pepsi is really not any different
from
Coca-Cola (NYSE: KO), just like 7UP and
Sprite, which were separated at birth.
It's been that way forever. When you have virtually
equivalent products like this, the business becomes all about
marketing. I know – there are other
revenue sources like the bottlers and licenses and movie
tie-ins. But the soda business is really about driving home
the brand.
If you look at the entertainment delivery business, you
have cable, satellite, and telephone. As technology
relentlessly improves, all of these services are going to
become commodities. In some ways, they already are, although
I think DirecTV
has better servicethan
Dish Network (Nasdaq: DISH) and
Time Warner Cable (NYSE: TWC). They try to
differentiate themselves, and some differences do indeed
exist and in very stark terms. But as the commoditization of
content delivery approaches, it's going to come down to brand
loyalty.
Hence, the hiring of a man who has focused on marketing
for a long time. DirecTV already does extremely well with its
customers. It only has a 1.5% churn rate, so when you become
a DirecTV customer,
you remain one. It appears that Mr. White has been
brought on to make sure things stay that way.
He's also got a long track record with acquisitions, which
is another important strategy in a business headed for
commoditization. And with all the assets held by Liberty
Media mixed in there, and John Malone's history for visionary
deals, it sounds like Mr. White was the best choice for
investors.
More entertainment Foolishness in beautiful
high-def:
GE and Comcast Finally Head for the Altar
The Daily Walk of Shame: DirecTV vs. Versus
It's All or Nothing for TiVo
This article was originally published as
DirecTV Wins the Pepsi Challengeon
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