By Peter J. Brown
In a world where iPods and Slingboxes are part of a new generation of consumer products, satellite TV and satellite radio service providers continue to deliver value to consumers. Satellite broadband services also remain a favorite for households seeking higher speed access in otherwise underserved or unserved areas. And yet, the satellite industry will have to work hard to stay one step ahead of the competition.
Consumers have lots of choices as new portable entertainment and high-bandwidth wireless networking options abound. Internet protocol (IP) TV looms large as well, opening up new opportunities for some satellite players while posing a competitive threat to others. Verizon, in particular, might trigger a price war with its new fiber optic service IPTV service, especially with cable giant Comcast. This could have an obvious spillover effect in the direct broadcast satellite (DBS) realm as well, given the bundled triple threat that the service embodies. "Although the MPEG-4 high definition (HD) upgrades will create excitement, we are reaching the saturation point -- 50 percent to 80 percent -- for satellite in some cities and towns in our immediate area of business. Where cable is bad, satellite rules," says Steve Serafin, president of Silicon Valley Satellite in San Jose, Calif. "My town, Morgan Hill, Calif., now is 50 percent to 60 percent satellite after 10 years, so the majority of households have had a dish experience at some point in time.
Having the two satellite options -- DirecTV and Dish Network -- has helped, says Serafin. "Our limited business plan is to lead the masses to the other side from the service from whence they came. If we can get them before the cable or telco boys bundle too many voice, video, HD, broadband and other services, we can still do OK. The real challenge is the broadband," he says.
In the United States, satellite continues to outrank cable in every category including overall satisfaction, channel selection, picture and sound quality, according to a survey of more than 2,500 TV viewing U.S. consumers published in the November issue of Consumer Reports magazine. Satellite's biggest lead in this survey -- 14 percent -- surfaced when consumers were asked about value for the money.
U.S. DBS Duo Prefers To Be Telco-Friendly
The DBS giants in the United States like HDTV, digital video recorders (DVR) and their ties to telcos. Global DBS sector leader DirecTV Inc's national HD offering will grow via local HD broadcast network channels in 12 markets -- four HD channels in each market -- by the end of 2005. "With the two new DirecTV Ka-band satellites, HD locals will abound later this year," says Serafin. "With HD locals, we will do a big job with the early adopters and the high-tech crowd that do not want to put up an over-the-air aerial costing $300 to $500. Cost is important, but most people simply do not want a big, mast-mounted antenna on the roof of their homes or multimillion dollar retreats."
The deployment of MPEG-4 set-top-boxes was scheduled to begin in mid-November, in stride with the launch of the HD local markets, says DirecTV Inc. spokesman Robert Mercer.
Bruce Leichtman, president of Leichtman Research Group Inc., reports that the number of households with DVRs doubled in 2004 and doubled again in 2005 so that approximately 8 percent of all U.S. households now own a DVR. He is closely monitoring the points of emphasis that lie at the heart of DirecTV's new $30 million DVR promotional campaign. For years, DirecTV offered its subscribers a DVR from Tivo, and more than 2 million DirecTV subscribers, about 14 percent, use Tivo boxes today. However, that chapter is apparently over now that a new DirecTV Plus DVR has become the focus of DirecTV's marketing efforts, starting in October.
"Attempting to put a DVR in every home makes no sense. The key is to get it in the right homes, the ones that really want it. That provides glue," says Leichtman. "The DVR is not the competitive weapon for DBS against cable today that it was two years ago, and the right message needs to be sent. The DVR is not about managing your life or pausing live TV. People who like TV like DVRs."
DirecTV has been exploring several new interactive services. Its Superfan enables viewers to watch up to eight NFL games on a single screen. Viewers can highlight one that they want to watch and then bring it up full screen.
"Our new interactive receivers enable viewers to use the Active button on their remote to access local weather information, financial market summaries, daily horoscopes, lottery information and what's hot in the week's movies, series and special programming from DirecTV," says Mercer. "The same interactive functionality will be available on the new DirecTV Plus DVR."
While DirecTV is exploring a variety of options for broadband, including WiMax, the ties to its telco partners remain strong. "We are working hand-in-glove with several telco partners who are offering DirecTV as part of a voice, video, data bundle, that is competitive with the cable offering," says Mercer.
Colorado-based Echostar Communications Corp.'s Dish Network would not comment about any WiMax-related broadband activity. Echostar remains well positioned in the telco camp especially after Echostar and SBC Communications Inc. revised their partnership.
"We have launched several different partnerships with telcos around the country, allowing customers to gain access to Dish Network video service plus basic telco services. This bundle, including wireless services in some cases, is actually often more robust than what the competition offers," says Marc Lumpkin, Echostar's interim director of corporate communications.
"SBC and Echostar have found a relationship that is going to be better. It is a win-win," says Leichtman who emphasizes that while both DBS companies in the United States once held a firm HDTV lead over cable, they have been sitting on the fence, and in the process, lost their innovative edge to cable when it comes to HDTV lately. "As for DirecTV, 15 percent of its gross new subscribers or 150,000 households last year came from telcos."
Dish Network is determined to be a leader in interactive television with offerings such as the TBS Sports Mosaic, which enables viewers to control how they watch football games, according to Lumpkin. Besides multi-angle sports viewing, Dish Network has also added a Sharper Image Shopping Channel, where viewers use their remotes to browse and order products. "Most of our customers come to us from the cable industry where they were dissatisfied with the prices and the absence of some features that we offer, including interactive channels, international channels and advanced DVRs," says Lumpkin.
Like DirecTV, Dish Network is planning to roll out new MPEG-4 set-top boxes this fall with local HD channels available in some markets by late 2005 or early 2006. The remaining 11 Voom HD channels will be added to the Dish Network programming lineup in early 2006 as well. As for the DVR, the multi-room Dish Player 942 represents Echostar's latest attempt to add functionality and features to this category. It is also in a Texas courtroom, accused by Tivo of violating a critical DVR patent.
Echostar also has unveiled its widely anticipated line of Pocketdishes, consisting of two portable media recorders and a media player which download, record and play content from a variety of sources, including DVRs, digital cameras and other devices.
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