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 why White was 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 White's credentials and where he came from to make sense of the move. 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 service than 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 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 Malone's history for visionary deals, it sounds like White was the best choice for investors.
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