Microsoft Builds Closer TV Ties With Murdoch

Microsoft Corp., in a move signaling closer ties with Rupert Murdoch’s News Corp., has signed a deal to build an upgraded version of its UltimateTV interactive-television technology with Mr. Murdoch’s international satellite-broadcasting network, Thursday’s Wall Street Journal reported.

The agreement, announced inside Microsoft this week in an e-mail message sent to employees, indicates that Microsoft (MSFT) hopes to expand aggressively UltimateTV to foreign markets in coming years, despite a rather lackluster response to the fledgling service so far in the U.S.

UltimateTV currently is delivered only through the DirectTV unit of Hughes Electronics Corp., a unit of General Motors Corp. (GM), and analysts estimate fewer than 30,000 U.S. subscribers have signed up since the service was launched five months ago.

Hughes (GMH) declined to comment on those estimates; Microsoft Vice President Tim Bucher declined to divulge any sales numbers but said Microsoft is “pleased with how sales have been doing,” particularly in the last three months when UltimateTV has been broadly available to retail customers.

The agreement comes as Mr. Murdoch, with expected financial support from Microsoft, is moving to wrap up lengthy negotiations to gain control of Hughes and merge its more than 10 million domestic subscribers into his global satellite network. Preliminary terms presented to General Motors months ago envisioned a $3 billion cash investment from Microsoft, but both Hughes and Microsoft declined to comment on that issue yesterday.

By teaming with Mr. Murdoch’s Sky Global Networks, which broadcasts satellite-to-home programming to about 85 million homes outside the U.S., Microsoft seems determined to proceed with development of more-advanced interactive services and market them outside its arrangement with Hughes. UltimateTV offers interactive and “digital video recording” features, such as allowing someone to watch one TV show while recording another. The service, which requires buying a set-top box for about $300 and paying an extra monthly fee to DirecTV, also offers e-mail features. Microsoft is expected to provide more storage capacity later.

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