DTH Providers Seek Alternate Revenue Streams

With cable and IPTV players putting more pressure on satellite pay-TV providers around the globe, the satellite operators are looking to move beyond their traditional business boundaries. Direct-to- home (DTH) operators in the United Kingdom and United States are leading the way in areas such as broadband services and traditional broadcast offerings, and other DTH players worldwide could soon look to implement more diverse and multi-faceted strategies in order to remain competitive.

In the space of 24 hours in October, BSkyB announced it had reached 1 million broadband subscribers in the United Kingdom, and EchoStar unveiled its new ViP-TV service, through which EchoStar has the ability to transport more than 300 channels of programming via satellite to telcos, private and rural cable operators, municipalities, and master-planned community video providers. These moves indicate that satellite pay-TV operators are looking at new and diverse revenue streams to stay ahead of the competition.

EchoStar

EchoStar has one of the most expansive strategies of any satellite pay-TV operator around the globe. As well as having its own fixed satellite services (FSS) division, the operator recently acquired Sling Media to enhance set-top box capabilities. EchoStar also plans to split itself into two divisions: a subscription business and an infrastructure business.

The separation of retail and FSS business will help EchoStar better manage two lines of business with distinct characteristics while also allowing the company to better package its retail division for a potential acquisition by AT&T, says Carlos Placido, a media analyst at NSR. “The ViP-TV offering targets small, [capital expenditure]-limited rural telcos and cable operators via an [operating expenditure]-for-[capital expenditure] value proposition. By entering satellite IPTV, EchoStar places itself in competition with SES IP-Prime and Avail Media-Intelsat IPTV offerings. This is an area that now looks congested, but we do not think EchoStar is late to the game because the takeup for these services have been slower than expected. Despite its rain sensitive Ku-band play, EchoStar counts with strong advantages as it relates to an extensive HD (high definition)/SD (standard definition) line-up and programming rights including local channels in major markets,” he says.

“EchoStar has looked to split into two pieces, one being a wholesaler, one being a retailer,” says Tom Eagan, a satellite equity analyst at Oppenheimer. The wholesale side “is probably the more notable of the two. Charlie Ergen, EchoStar’s CEO, has spoken before about manufacturing a couple of extra satellites for wholesale capacity. He thinks with the increase of HD creation for cable networks, there will be increased demand for HD transmission, therefore increased wholesale satellite demand.”

The acquisition of Sling Media hints at a more convergent strategy going forward, says Ben Swinburne, a media equity analyst at Morgan Stanley. “I think over the long term, convergence of online IP video and traditional broadcast television is inevitable,” he says “... EchoStar’s recent acquisition of Sling Media puts it in the driver’s seat towards true television viewing portability by controlling the software interface rather than the actual high-speed connection. My guess is EchoStar integrates Sling into its existing Dish Network set-tops, offering a real differentiating IP-based video product that immediately leapfrogs the cable and telco operators that control the IP connection into the home.”

But Swinburne is not sure how valuable the FSS side of the business is to EchoStar. “FSS is a bit of a black box for the financial community analyzing EchoStar, mainly because it is very difficult to assess how much excess capacity really exists in the EchoStar fleet,” he says. “Given the growing need for HD capacity and the important of picture quality — particularly as Fios gains footprint, my guess is that there this is a somewhat modest revenue opportunity for Dish in the near term.”

EchoStar

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