Hughes' El Segundo operations may be cut under News Corp.

In a telling sign of the fast moving changes at Hughes Electronics Corp.'s DirecTV unit, the two top executives will be based in New York and not at the El Segundo headquarters.

Having both Hughes Chief Executive Chase Carey and DirecTV Chief Executive Mitchell Stern in New York will allow News Corp. Chairman Rupert Murdoch keep a closer eye on Hughes, the trade publication Variety reported.

The appointments may also portend coming cuts at the El Segundo offices, said Thomas Watts, an equity analyst tracking Hughes for SG Cowen Securities Corp.

"I've talked to News Corp.," he said. "They said they have a whole empty floor in their building (in New York), and they have a pretty thin staff at the top."

Watts said he expected operations staff to remain largely unaffected by the new structure, but that "certain overhead people," like finance and accounting staffs, could start to be cut in the next six months.

Hughes employs more than 11,000 worldwide, and it was not clear how many were in El Segundo. Executives of both Hughes and News Corp. could not be reached over the holiday period.

News Corp. last month bought a controlling 34 percent stake in Hughes, whose DirecTV is the biggest U.S. satellite-TV service, for $6.6 billion in cash and stock. Murdoch's media company, which offers satellite-TV services on five continents, plans to introduce interactive features to DirecTV subscribers, Carey said in an interview with Bloomberg News.

Subscribers of DirecTV, the largest U.S. satellite TV provider, can expect an improved set-top box and features similar to those offered by Murdoch-controlled British Sky Broadcasting Plc. BSkyB customers in the U.K. can shop through the TV set and choose camera angles while watching sports.

"Over the next year you will see an array of interactivity from us," said Carey, formerly News Corp.'s chief operating officer. "Look at what BSkyB does today in areas like news and sports, where you can pull up the story you want. In sports you can look at camera angles."

The acquisition expands Murdoch's worldwide satellite business by 12 million viewers and gives him a new outlet for movies and TV shows produced by his Fox Entertainment Group. Regulators in the U.S. approved the purchase with a condition meant to keep News Corp. from withholding content--such as games shown on his regional Fox Sports channels--from cable operators.

DirecTV competes with cable television operators and with Englewood, Colo.-based EchoStar Communications Corp., the second-largest satellite service with about 9 million subscribers.

Carey said the company would offer a high-definition set-top box in the first quarter of 2004 and introduce new features and capabilities "almost each month." He declined to comment on specific features that will be added, or identify programming changes.

EchoStar, which averages $50.75 a month in revenue per subscriber, is adding subscribers at a faster rate than DirecTV, which takes in $64.50 per customer, said Rob Sanderson, an analyst with American Technology Research. Cable television operators get about $48 to $50 per customer each month, he said.

"They've picked their spot. They've been very competitive and they built the business as a low-cost provider," he said. "They seem to have done a good job focusing on that middle market."

DirecTV will continue to sell TiVo Inc. personal video recorders along with the service. The company also will still work with Convergys Corp., which provides some customer service functions for the company, Carey said. More than two-thirds of the 209,000 subscribers TiVo added in the quarter ended Oct. 31 came from its marketing partnership with DirecTV.

Carey said he's anxious to contain costs and expects "difficult" conversations with program providers whose contracts come up for renewal. "We know programming is important, but when you're in a non-inflationary world like we are, the costs have to be reasonable," he said. "That doesn't mean we don't want to reach agreements with people, but they have to be realistic."