Tough Decisions on Tap at PrimeStar
Today's 3 p.m. directors' meeting of PrimeStar at a New
York lawyers' office puts some tough decisions on
directors' plates.
According to SkyREPORT sources, the future of the service
may now hinge on a choice between two radically different
directions: (1) Sell to DirecTV; or (2) Continue as a
medium-power service.
The first choice is a favorite for many observers. As
Merrill Lynch vice president Tom Watts notes, the
conversion cost per PrimeStar sub is estimated at $350
per sub and debt at $550 per sub. With DirecTV subscribers
valued at approximately $2,000 each, the leading DBS
service could certainly snap up PrimeStar subscribers,
thereby vaulting itself to a 6.25 million-plus subscriber
service and a commanding lead over rival EchoStar.
The problem with this scenario is that few expect DirecTV
to agree to pay top, or even medium, dollar for the
troubled No. 2 service (not to say even begin to figure
out how to treat the subs ... given the NRTC involvement,
it could get complicated).
There's always the outside chance that Charlie Ergen's
EchoStar might weigh in with a (very) slightly better
offer. An even bigger long shot is a renewed interest
from Loral. But, in any event, will the cantankerous cable
partners agree to bargain basement exit agreements?
History suggests not, but having backed themselves into a
corner, their only alternative may be choice number two.
Needless to say, continuing as a medium power service has
more than its share of problems. If the cable partners decide
to go this route, many expect a complete overhaul (again)
of PrimeStar personnel, marketing strategies, etc. What's
more, the approach of many of the partners (who appear to
viscerally hate DBS) will likely be to milk the service until
it simply dries up somewhere down the road. At least, in
the opinion of some of the cable operators involved, they
might at least get a little bit of their investment
back ... with a small return.
|
