DBS sales slowing........................
infoseek.com
Dbs Business Slows, Market Confusion Blamed
Consumer Electronics
Mon, Jul 28 1997
Fast-growing DBS market has hit speed bump in recent months as combination of wide-ranging promotions and lack of local TV-channel access has caused consumers to delay buying systems, industry executives said at Satellite Bcstg. & Communications Assn. (SBCA) show last week in Nashville. Despite slowdown, Primestar will launch high-power DBS service this fall -- and has approached major CE manufacturers to join effort. Slackening of market was underscored by U.S. Satellite Bcstg. (USSB) survey of 11,320 consumers in April-May. Study found that only 600 had shopped recently for digital satellite system, and 70% of those didn't buy. Decision not to buy came after many of those surveyed had shopped 4 different retailers over 6 months, USSB said. Although DBS market continues to grow by about 6,000 subscribers daily, service providers said they have become more conservative in projections. DirecTv, which at one point projected 10 million customers by 2000, said it won't meet figure. It has added 350,000 subscribers since start of year on way to 1.1 million overall for 1997, same as year ago, Pres. Eddy Hartenstein said. DirecTv has 2.7 million total subscribers. Echostar, which had 590,000 customers as of June 30, conceded it will struggle to hit internal goal of million by year-end. And Primestar said it will add slightly more than 500,000 this year in growing to 2.2-2.3 million total by year-end. At heart of slowdown has been confusion in market brought on by: (1) Widely varying pricing strategies for hardware and programming. (2) Consumer concerns about lack of access to local TV stations via DBS. (3) Perceived need to have additional integrated receiver/decoder (IRD) to receive programming on 2nd set in home. More than 87% of those surveyed by USSB cited inability to receive local stations as major reason for not buying system, while 60% mentioned 2nd-set issue, USSB Pres.-CEO Stanley Hubbard said. Wide range in pricing showed signs of abating. Echostar won't add full-featured IRD below $199, although it did unveil bare-bones unit at $129 that's designed for 2nd set in home and will be packaged with stepup models. And while retailers said it's too early to gauge consumer response to DirecTv's lifting of year-long $200 rebate program earlier this month, Hartenstein said entry-level pricing is in $239-$249 range, well above retail tags that in some cases fell below $100 with rebate. DBS "has been sold as a widget up until now," Encore Chmn.-CEO John Sie said. "What it has lacked is a consumer marketing position so that the consumers know what they've got. DBS has the best of cable plus a video store in the home. If you can creatively weave that story, it can attract a broader consumer rather then trying to pick people dissatisfied with cable, which is a narrow niche." In addressing local TV access issue, USSB will embark on major fall promotional campaign touting benefits of off-air antennas in print and broadcast ads, Hubbard said. Negotiations with broadcasters on both access to local programming and so-called white areas is "almost at a standstill," said SBCA Pres. Charles Hewitt, who also gave long odds on federal legislative solution. "There is an overall message that needs to be uniform concerning local broadcasting and 2nd sets," Hewitt said. "We have to pull together our platform providers and the C-band industry to start working on these issues with a common voice." To alleviate plight of retailers, StarPath Pres. Rik Hawkins said DBS industry should borrow from MSOs focus on local markets to grow business. He cautioned that greater attention needs to be paid to independent dealers -- retail segment that's being "bled to death" by price wars launched by large chains. "You drive this business locally up and out, not from the bird down," Hawkins said. "People have to look at Primestar, DSS {Digital Satellite System} and Echostar and make sure they have a presence locally, just like the cable companies, because that's what endears customers to it." Despite slowing market, Primestar will launch 120-channel high-power DBS service by 4th quarter, and has had talks with several CE manufacturers including Matsushita, Sony and Thomson on supplying product, company said. Discussions with CE manufacturers have been preliminary, and sources indicated that DSS agreements with DirecTv may prevent them from entering competitive pacts. However, DirecTv contracts wouldn't prevent OEM agreements. But Thomson spokesman told us company hasn't entered any agreements with Primestar. Company said any reports on Primestar might flow from Thomson's OEM discussions "with all segments of the industry, including cable operators who may also be partners in existing or planned program distribution services." Besides its own DSS receivers, Thomson builds digital set-top boxes for DBS and telco customers. Matsushita and Sony executives couldn't be reached for comment by our deadline. Primestar is seeking primary manufacturer and cross-licensee, and hasn't decided whether to use General Instrument's DigiCipher or DVB-compliant compression system, Pres. Daniel O'Brien said. Pace Microelectronics, which was exhibitor at SBCA show, is said to be negotiating for Primestar contract. Pace was in running as IRD supplier for News Corp.'s proposed ASkyB service. Primestar reached agreement to sell nonvoting stake to News Corp. earlier this year in exchange for high-power orbital slots. Pricing and specs for high-power products haven't been finalized, Primestar said. "When you're selling retail products, it's important to have a brand name," O'Brien said. "We will have 2 manufacturers so it's more than just a cost-reduction effort." DirecTv's Hartenstein downplayed Primestar's move, saying that service "is so wedded" to General Instrument that it's "a game that I don't think any of the CE manufacturers want to get into." Primestar expanded retail store fronts to more than 10,000 with addition of Key America and Associate Volume Buyers groups, and is in negotiations with 2 national chains, with deals to be finalized within 6 weeks, spokesman said. Montgomery Ward is said to be among those negotiating to sell product. In bringing high-power service to retail, Primestar will include pricing strategy in addition to leases, Chmn. James Gray said. High-power service will be offered via 28 transponders at 110 degrees W and will expand to 225 channels with addition of 2nd satellite in same slot in 1998. Primestar also has 11 transponders at 119 degrees W, but future of slot remains unclear. Cable Plus originally planned for satellite will be offered only on special order basis, company said. Cable Plus service was to feature combination IRD that would have offered both high-power satellite and cable service. Primestar will maintain medium-power service with 160 channels through 2003 under contract with GE Americom, although customers will start transition to high power in 2001. Current customers can be upgraded via slot on side of box, company said. Primestar will complete roll-up of partnership by 4th quarter, although process has moved slightly slower than expected, O'Brien said. Part of process will be federal review, which is expected to cover foreign ownership issues. After roll-up, TCI Satellite will have 36.8% stake in company, Time Warner (29.6%), Comcast (10.1%), MediaOne (9.7%), Cox (9.3%), GE (4.4%). Primestar is in process of selecting CEO and will locate hq in either Philadelphia or Denver while operating 5-7 regional offices, O'Brien said. As for current service, Primestar introduced "The Big Deal" promotion that will run Aug. 28-Oct. 31. Package offers $50 rebate on installation, free first month of Showtime, 100-channel PrimeEntertainment package, PrimeFinder remote with combined value of $130. Primestar also will add 9 channels to medium-power service in Aug.-Sept., including doubling PPV to 10 and expanding premium movie channels to 12. In other show news, Echostar said it was abandoning plans for spot beams for local programming (see separate report, this issue).
(Copyright 1997 by Warren Publishing, Inc.)
_____via IntellX_____
Copyright 1997, Consumer Electronics. All rights reserved. Republication and redistribution of Consumer Electronics content is expressly prohibited without the prior written consent of Consumer Electronics. Consumer Electronics shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon.
ÿ |
