AOL and Hughes Electronics Form Strategic Alliance to Accelerate Growth of DIRECTV and AOL TV

Strategic Insights -

In a bid to drive growth and revenue through innovative digital entertainment and Internet services, America Online (AOL) and Hughes Electronics have announced a strategic alliance. The partnership aims to integrate AOL's interactive TV and high-speed Internet services with Hughes' DIRECTV television entertainment and satellite-based data services. This alliance will accelerate subscriber growth and revenue for DIRECTV and DirecPC, AOL's high-speed satellite-based Internet delivery system.

Key Takeaways:

  • AOL will make a $1.5 billion strategic investment in Hughes, and the two companies will launch a cross-marketing initiative to package and extend the reach of both AOL TV and DIRECTV.
  • The alliance will also enhance the development of Hughes' next-generation satellite system, Spaceway, scheduled to launch in 2002.
  • AOL will offer its high-speed Internet service, AOL-Plus, via DirecPC, making it available nationwide by early 2000.
  • Hughes will invest $1.4 billion to design, manufacture, and launch its next-generation satellite system and accompanying ground infrastructure.
  • The partnership will also explore making broadband satellite offerings available in Latin America as the market evolves.
  • AOL and Hughes have agreed to explore unique integration possibilities for the "AOL Anywhere" strategy, expanding the companies' interactive services to TV and other platforms.

Statistics:

  • America Online has more than 16 million AOL members in the US.
  • DIRECTV has more than 7.3 million subscribers.
  • DirecPC satellite Internet network provides broadband download speeds up to 14 times faster than the standard 28.8 kilobits-per-second analog modem.
  • AOL-Plus members will be able to transmit information back over standard telephone lines at speeds as fast as 56.6 kbps.
  • Hughes has invested $1.4 billion in the next-generation satellite system spaceway, scheduled to launch in 2002.
  • America Online aims to offer its AOL-Plus high-speed service over all broadband technologies, including DSL, cable, satellite, and wireless.

Sources:

  • Business Wire, June 21, 1999, AOL to Make $1.5 Billion Strategic Investment in Hughes Electronics Corporation
  • America Online, Inc., "About America Online"
  • Hughes Electronics Corporation, "About Hughes Electronics Corporation"