Satellite TV has come a long way since its introduction. Consumers have responded enthusiastically to the high picture quality and host of viewing options available. Retailers like the products as an easy sell. With the addition of local channels beginning last fall, one of the last barriers for many consumers is now gone.
But the business is growing in other ways, looking to high definition and Internet services. The annual Satellite Broadcasting Association show (SBCA) in Las Vegas July 19 to 21 will be a forum for discussing the state and future of the satellite TV industry, and the many issues facing it presently.
The business is booming. DirecTV claimed over 700,000 new customers have turned on their DirecTV service this year, for a total subscriber base of approximately 8.6 million. DISH Network announced it passed the 4 million customer mark in April.
Despite the market success of the category, neither of the two players in the market, DirecTV or Echostar, are sitting on their laurels enjoying their high sales. Both companies continue to compete by mixing and matching promotions to end users, making it difficult from one month to the next to know exactly what the current price of admission is. Offers vary from free or discounted installation, to free months of programming to free or discounted hardware, all make the initial sale.
A current DirecTV program gives new customers two free months of programming including premium movies and sports. Before that the network offered free dish installation to new customers.
A current Echostar campaign gets new customers free dish installation and a $40 Sears gift card when they purchase a DISH Network system from Sears and sign up for Showtime Unlimited movie package.
Another Echostar offer gets consumers a free Personal TV service for three year with the purchase of a DISHplayer personal video recorder/satellite receiver. A $199 rebate off the purchase of the receiver ($399 SRP) is offered for customers who subscribe to a $39.98 program package. Free dish installation is also offered.
Local Programming
One of the sticker issues the DBS companies are now facing is obtaining retransmission agreements with local broadcasters. Echostar has had some trouble in that area, with some local stations in Minneapolis, Nashville, New York and Salt Lake City refusing to agree to retransmission of their signal. As a result, DISH network was forced to turn off the select channels until retransmission consent could be reached. In the meantime, in a show of good will, DISH network provided affected customers with free antennas and discounted installation.
SBCA President Chuck Hewitt responded by saying that the situation shows that the retransmission consent process, as described in the Satellite Home Views Act, does not work, linking the retransmission issue to must carry. By law, satellite television providers must carry all broadcast signals in a given market by January 1, 2002, or not carry broadcast signals to that market at all. "Retransmission consent puts consumers at the mercy of the television stations," he said. According to Hewitt, the current channel capacity of DBS providers does not allow carriage of all available signals. Many other markets will not have local signals available by DBS simply because of the inflexibility of must-carry rules. The current must-carry regime will create haves and have-nots in the video marketplace," he added.
Prior to the mandated May 29 deadline, DISH Network obtained multi-year retransmission agreements with stations in 28 markets where the company currently provides local into local service. Retransmission negotiation extensions with other broadcasters brought DISH Network's local stations up to 121 of the 125 it had been broadcasting prior to the may 29 deadline. On June 1, DISH Network came to a multi-year agreement with Minneapolis FOX affiliate WFTC and promptly turned the station back on for its customers. At press time, Echostar still had outstanding agreements with three stations that remain shut off to customers. "We begged for extensions, and they refused," said an Echostar spokesperson.
DirecTV reached retransmission consent agreements with the four major broadcast networks (ABC, CBS, FOX and NBC) and recently announced consent agreements with 11 station groups. The network currently offers local channels in 23 markets and plans to reach 35 markets by the end of September.
High Definition
Hughes, Toshiba, Panasonic, Zenith, Sony and Mitsubishi all have plans to introduce DirecTV HDTV satellite receivers around the same time this fall for between $500 and $1,000. Thomson last year began shipping its DirecTV HDTV box, the DTC100, at a price of $649. According to Thomson, the product is in great demand, and the company is selling every one it makes, despite the fact that it's only HD connection is a VGA port.
Currently, getting high definition programs over satellite can be nearly as frustrating as trying to pull signals off the air--while the program always comes perfect over a properly aligned satellite, there's still very little to watch. High definition programming from DirecTV is limited to channel and two pay-per-view channels. A spokesperson noted that additional HD offerings are being examined.
Echostar just launched its DISH HD product, which includes a second dish and a model 6000 receiver for reception of high definition HBO and Showtime. The $499 product receives satellite HD feeds, features RGB out and can be upgraded with $100 module for off-air HD reception.
When asked if high definition will have a significant effect on the satellite market, Marc Lumpkin of Echostar pointed to the lack of HD programming. "We don't charge for these channels now, so there's no revenue," he said. Lumpkin said Echostar hopes to add three or four more HD channels this year, including pay-per-view, but had no details to announced.
Internet
DBS providers are also trying to make a dent in the growing broadband Internet market. Hughes Network Systems, parent company of DirecTV, offers its Direct PC service. Echostar recently announced a $50 million investment in Gilat-To-Home two-way satellite Internet.
In April, Hughes announced a two-way broadband satellite version of DirecPC available early in the fourth quarter. The service will feature upstream speeds up to 256 Kbps and downstream of over 40 Mbps. A DirecDuo offering will allow consumers the ability to receive Internet and TV service over the same dish. USB compatible hardware is expected to be available. Cost and availability were not released at press time.
Echostar's agreement with Gilat-To-Home broadband service will allow Echostar to distribute the service, powered by Microsoft Network. Internet access will be up to 10 times faster than standard phoneline modems with an extra high burst rate. A single dish can be used for Internet and TV service reception. The 24-inch by 36-inch dish will also be able to receive DISH Network's DISH 500 service. Pricing of hardware, installation and service options will be available at a later date.
More Services to Come
At a New York press conference in mid-June, Thomson made the official introduction of the Microsoft and DirecTV colaboration announced at Janurary's CES. The product, model DS4290RE, is a combination DirecTV Plus receiver, PVR hard-drive video recorder and Microsoft-backed interactive Internet appliance. It will be called UltimateTV and will carry the RCA brand.
While competitors TiVo and Replay allow for various levels of compression quality for video recording, the UltimateTV box records at the original compression level of the signal from DirecTV. That means, theoretically, viewers will experience no loss of quality from recordings for up to 30 hours. Thomson executives would not answer questions on the size of the hard drive.
Details available at the press conference were slim, especially regarding price. No hints were allowed on what the harware will cost or what the price of the service will be.
Pricing will be at different levels, depending on the amount of services desired. Program packages will be at current DirecTV prices. Prices for other servies (PVR funtion, Interactive programs, e-mail and Internet access) will be announced closer to launch, in time for the 2000 holiday season.
Ironically, the day after the UlimateTV announcement, AOL announced a $200,000,000 investment in PVR service provider TiVo and the intention to produce an AOL TV/TiVo set-top-box. The product would combine AOL TV Internet service (first demonstrated at CES) and TiVo PVR service. Availability was stated to be early in 2001. No information about who would manufacture the box was available, though there is reasonable cause to speculate that Philips may be involved. At the 2000 CES Philips demonstrated an AOL TV set-top-box, though without TWo. Philips also manufactures TiVo-based Personal TV set-top boxes.
A DirecTV/TiVo combo set-top-box is also expected to debut this year from Philips. Sources indicated that the product will likely be shown at SBCA.
