Cover Story: Satellites: Premiere Property For Cable Distributors
Several satellites have emerged as the best in the business for serving cable systems after years of development, and have aggregated attractive neighborhoods of top programmers. They include SES Americom’s AMC 3 and AMC 4 over North America, SES Astra’s fleet over Europe, Eutelsat’s Hot Birds and Eurobird over Europe, several Panamsat satellites over the Americas, and Asiasat and Apstar 2R in Asia.
A second tier of highly desirable neighborhoods also is being developed in other locations, such as the two SES Americom satellites in the “Cable 2” neighborhood over North America, Loral Skynet’s Telstar 5 over North America, and spacecraft owned by Arabsat, Eurasiasat, Hispasat and Intelsat over the Middle East and Latin America.
“Satellite Economics 101 tells you the thing that makes these locations premiere is the neighborhood of programmers on the satellite. The value of the satellite is determined by who their anchor tenants are,” says Bob Zitter, HBO senior vice president of technical operations. HBO has become one of the most sought after anchor tenants in the world for cable satellites, and thus the entertainment network has been able to strike particularly good deals as operators try to land a great anchor tenant as bait for other broadcasters and programmers.
In North America, the major cable programmers have either followed the HBO/Turner family onto the Panamsat satellites or the Viacom family onto the old GE fleet, now owned by SES, Zitter says.
In Latin America, ESPN, Disney and others have joined HBO and Cinemax on Panamsat satellites with their continent-wide coverage. The partners occupy five transponders spread across two satellites–PAS 5 and PAS 9.
In Asia, HBO uses Loral’s Telstar capacity on the Apstar 2R satellite that also carries Sony, Hong Kong’s TVB, Disney and Chinese language programming.
In Europe, HBO’s distribution is now limited to certain markets but is growing. It uses capacity on the Israeli Amos 1 satellite, and will expand in Europe next year on Amos 2 in a partnership with Sony and Disney that will provide strong anchor tenants for Amos’ recently established neighborhood.
The most important points in selecting a satellite are whether its coverage area matches the broadcaster’s needs, and then technical aspects, Zitter says. “For example, we don’t like a satellite with U.S. programming to have a large footprint over Latin America or Asian satellites to cover Africa because of piracy problems,” Zitter says. “Another thing we rank extremely high on our wish list is protection, whether it’s on the satellite we’re going to be using or with other satellites.”
In HBO’s case, the last consideration is price, he says. “We know that because of the value we bring to a satellite operator we will often get a good price.”
Two Neighborhoods, With Two On The Way
SES Americom’s U.S. cable customers are concentrated in two neighborhoods over North America. Each neighborhood has two slots and two dedicated 24-transponder satellite payloads. With a single dual-feed antenna, a cable station on the ground (called a headend) can receive programming from both satellites in each neighborhood.
Americom’s Satcom C 3 and Satcom C 4 satellites are in the premiere slots at 131 degrees and 135 degrees, where distribution can reach 80 million homes. Although their primary distribution is to cable headends, some programmers also permit DBS operators to use these feeds for redistribution as well. Both satellites will be replaced in 2004 with new spacecraft, AMC 10 and AMC 11. In addition to Viacom’s networks, the satellites carry The Weather Channel, Court TV, the Do-it-Yourself channel, The Food Network, Crown Media’s Hallmark Channel, Home and Garden TV, Lifetime, The Movie Channel, MTV, Nickelodeon, Showtime, TV Land, VH1 and C-SPAN.
Americom developed its first cable neighborhood position in the early ’90s by moving the two satellites to those locations, according to Carl Capista, Americom’s vice president of satellite services for North America. It worked with the content owners on the strategy and the neighborhood was sold out quickly. Americom does not reveal how much it costs to use the premiere position satellites, but it is a safe guess that these satellite command the highest prices in the business because they are able to generate so much money for their users.
“By putting like-minded program services on the satellites, you establish a protected neighborhood. Only cable programmers were allowed on the system, which means systems on the ground would always be focused on those satellites to get that programming,” Capista says. An antenna giveaway also helped, as did the offering of a much higher level of in- orbit protection services. Americom specifically designated another in orbit satellite for preemptible services that would immediately back up the main satellites in case of a failure. Today, Americom reserves its AMC 7 satellite for protection of services in this neighborhood.
Americom has launch contracts with International Launch Services and manufacturing contracts with Lockheed Martin for the replacement satellites AMC 10 and 11 in addition to a ground spare, AMC 18. The new satellites will be A2100 spacecraft that use solid state power amplifiers instead of traveling wave tube antennas, shaped-reflector antennas and triple redundancy command systems. They will have higher redundancy, better switching and higher power than the current satellites. The replacements, planned for operation in 2004, are more than half sold out with renewals and new users, Capista says.
SES Americom’s second neighborhood, Cable 2, consists of the AMC 1 and AMC 4 satellites at 101 degrees and 103 degrees. The two 24-transponder C-band payloads of these hybrid satellites were launched in 1996 and 1999 and have about a decade of life remaining. Americom has been developing this neighborhood for two to three years with an antenna giveaway program, and both satellites have limited available capacity. Almost 60 million cable subscribers out of a universe of nearly 70 million are able to receive programming from Cable 2.
As Americom’s first two cable neighborhoods move towards being sold out, the company is evaluating a third neighborhood. “Entertainment programming is the largest source of revenue for SES whether it’s Americom or Astra and has been that way for a long time. We see that continuing,” Capista says. “We’re not ready to announce the locations or satellites, but the concept of a third cable neighborhood is under development now.”
Creating A Legacy
If that’s not ambitious enough, SES has embarked on another initiative to get into the direct-to-home satellite broadcast service area with its America2Home project. If successful, SES will begin offering a platform for consumer television and broadband Internet services in North America by the end of 2004 via a two-satellite system–AMC 14, a BSS satellite planned for 105.5 degrees W and AMC 15, an FSS Ku-/Ka-band satellite under construction, for 105 degrees W. America2Home’s service model differs from the direct-to- consumer approach of DirecTV and Echostar. Americom will operate the satellite platform but will not provide services directly to consumers. Services will be provided to America2Home customers such as the broadcasters and content owners who want to offer their content directly to subscribers, bypassing the DTH operators and presumably being able to keep more of the revenue as a result. Americom needs to win FCC approval in the next few months to get the new service into operation in the next two years.
Americom will use the 105 degrees and 105.5 degrees W slots for America2Home. It is already operating a licensed Ku-band satellite in the 105 degrees W and the Ka-band spectrum at the 105 degrees W slot was awarded to Americom by the FCC in the first round of Ka-band authorizations. It already has rights for the 105.5 degrees W slot through a license granted by the government of Gibraltar and is seeking FCC approval to offer DBS type services from the planned spacecraft into the U.S. market. Other DBS providers oppose the request, saying the satellites will cause interference, a contention that SES disputes based on its experience in Europe with closer spacing of DBS satellites.
Kevin Smyth, SES Americom’s senior vice president for residential satellite services, says discussions were underway with multiple potential partners and customers for the capacity in early summer. “We don’t think all the ethnic and foreign language broadcasters are committed yet [to existing systems]. Content owners and broadcasters are expressing interest in alternative ways to reach the market. They are quite interested in the agnostic or neutral platform approach we’re providing,” he says. The pending merger of DirecTV and Echostar will concentrate the DTH business in one company’s hands and has encouraged some broadcasters to look elsewhere, he adds.
In Europe, the America2Home model was developed first by SES Astra to provide broadcasters and content owners free to air, pay TV and broadband directly to residences. The programmers handle their relationship with the end viewer directly, relying on Astra for satellite services. Ultimately, Americom will put numerous satellites into the slots, just as SES has done over Europe, to create a powerful satellite neighborhood at that location.
Using SES Astra, broadcasters like BSkyB and CanalPlus get economies of scale from sharing a platform over Europe. They are able to turn their satellite capacity management over to a global satellite operator with a legacy of experience, plus benefit from the huge installed base of viewers.
Smyth says a new hybrid Ku-/Ka-band satellite is being built by Lockheed Martin for the 105 degrees slot and the company is preparing design specifications for a satellite for the 105.5 degrees slot. “We are looking at ways to introduce very advanced technology and look at new services that are not currently in the market and to some extent take advantage of the fact that the incumbents have invested capital and are to some degree constrained by that,” Smyth says.
You Get What You Pay For
The model that America2Home is following is one that has proven to be profitable and popular in Europe, where SES’s capacity has become the most expensive satellite time in the world, satellite users say. In the long run it’s worth it, according to one customer who shops extensively for global satellite capacity. Dick Tauber, vice president of satellites and circuits for global news network CNN, is on the board of directors of the North American Broadcasting Association (NABA) and chairman of the Inter-Union Satellite Operations Group (ISOG), a collection of more than 50 of the world’s top broadcasters. CNN uses 16 transponders on 11 satellites on six systems in its global news operation. Tauber says CNN’s programs are carried on the best satellites available to destinations all over the world.
“If you want to be on satellite in Europe, you want to be on SES even though it’s one of the most expensive satellites in the world,” Tauber says. “It took us a long time to step up to the plate, but when we finally did, we immediately gained a lot of audience share we never had in Europe.”
The cost of using Astra has been extremely high, as much as $6 million per transponder per year about four or five years ago, sources say. With more capacity in orbit, that price has since come down, but as competitor Joan Byrnes, chief operating officer of Loral Skynet, points out, “when you are looking at 80 million households, it’s easy to charge that much.”
In the United States, prices to use premium cable distribution capacity are far lower, currently ranging from $125,000 to $185,000 a month for a transponder depending on the characteristics of the satellite and capacity, such as location, who else is in the neighborhood and how robust the fleet is overall.
Antenna and decoder giveaways are one way to set up a neighborhood, but another is to offer special customers rock bottom prices, so low that they can’t say no. Tauber recalls the legendary Rene Anselmo, the deceased founder of Panamsat (PAS), offering media owner Ted Turner satellite capacity for a year for $1 back in 1989 on PAS 1 when Panamsat was just starting out and had no broadcast customers. “Ted went along with it, got on the bird and never left. He stayed with Panamsat around the world and gave them other services as they’ve been developed by Turner. All this came from a gutsy move by Rene,” Tauber says.
Earning A Heavyweight Title
Thus today, PAS carries such heavyweights as TNT and CNN International on its Galaxy satellites. PAS has struck large, long-term contracts with both Time Warner and Disney/ABC for capacity on its satellites, including an 18-year deal to provide capacity to Disney.
Its legacy reaches back to 1983, when HBO began using the Galaxy system, then owned by Hughes, to distribute programs to cable operators in the United States. PAS claims to be the leading provider of satellite services to the broadcast industry today based on the amount of its business devoted to video and its legacy.
In North America, Panamsat considers its cable neighborhood to include 11 Galaxy satellites positioned in an arc that reaches from 74 degrees to 133 degrees W (Galaxy 1R), according to Tom Eaton, PAS executive vice president and head of global sales and marketing. In Latin America, it operates the premiere cable neighborhood for the region on PAS 9 in C-band.
In the United States, Galaxy satellites can reach every one of the 98 million TV households with programming. Some U.S. customers are A&E, BET, Bloomberg Television, Dow Jones, ESPN, MTV and the USA Network. It helps international programmers reach the U.S. audience by bringing signals from China, India and other places to nearly 11,000 cable systems and two million home dish users in the United States. In the international market, PAS provides program distribution to dozens of broadcasters, including the BBC, China Central Television, India’s Doordarshan, Japan’s NHK, ESPN, Discovery, Disney and HBO to reach targeted audiences around the world.
The broadcast customers are more sophisticated and demanding now, no longer shopping for cable distribution based mainly on location and having good anchor tenants, Eaton says. “Panamsat looks at adding other things to the neighborhood,” he says, such as the “Power of 5” antenna giveaway, in which a qualified cable affiliate can acquire a kit that views five PAS satellites with two dishes and shared electronics. The antennas would point at Galaxies 11, 3R, 10R, 5 and 4 at 91 degrees, 95 degrees, 123 degrees, 125 degrees and 127 degrees W respectively.
“It adds value and further develops the most valuable cable neighborhood we have, which is the Galaxy fleet,” Eaton says. PAS also is buying smaller C-band satellites from Orbital Sciences Corp. that will be put into Galaxy slots and extend the service life for broadcast customers.
PAS has an in-orbit protection plan that involves both a spare in the U.S. arc and an option to customers of buying backup service on other satellites, should a failure occur. “If something were to happen on a transponder you operate, you have a right to activate on another transponder,” Eaton explains.
The company is not working to develop any new neighborhoods, but has informed its investors and customers that it pulled back earlier plans to expand into new areas. “When I talk about growth these days, for PAS, it’s largely driven by providing more services to the core customers we have today, a stronger presence within those accounts,” Eaton says.
However, Eaton does see customers asking for new distribution methods for ethnic programming. For example, Australian broadcaster, Television and Radio Broadcasting Services, signed for several transponders in early 2002 to take its programs across the Pacific into North America, and Korean and Chinese broadcast customers also are exporting their content to other countries via PAS satellites.
Years Of Dedication
Loral Skynet is the third largest player in the North American market for cable distribution, using slots in the middle of an arc over North America for Skynet’s broadcast neighborhood. Loral’s broadcast customers are carried on Telstars 4, 5 and 6 at 89 degrees, 97 degrees and 93 degrees W. The big networks, including ABC, CBS and Fox, have long used the Telstars, creating a neighborhood that has attracted broadcast syndicators who want to reach the same viewers. Each customer leases 8 to 10 transponders from Loral. Other broadcasters are carried on the Telstar system through content aggregator specialists like Vista Satellite, Globecast and The Space Connection.
Becoming a service provider for broadcasters takes years of dedication to promote and position a satellite fleet. When Loral purchased the Skynet system from AT&T five years ago, its satellite system had a long history of servicing broadcasters, with a heritage of service to the telephony markets. Since then, Loral has enhanced the broadcast business base while it also grew the number of its satellites and partnerships to become a global presence.
Skynet uses primarily C-band for the feeds, and uses its Ku-band capacity for satellite newsgathering for many of the same customers. “From a reliability perspective, cable programmers are looking for a signature cable neighborhood and a satellite fleet with sufficient depth to ensure reliable service. It has to have a number of cable headends looking at it and also host other premiere programmers, so the content is enough to attract infrastructure on the ground. An in orbit spare is also important to them,” Byrnes says.
Typically large networks will split their programs between two satellites to provide some added redundancy in case of outages.
Loral’s Telstar 7 satellite carries cable programs from 129 degrees W on the Western side of the North American arc. In October, Loral Skynet is going to launch Telstar 13, a condo satellite shared with Echostar, into that 121 degrees W orbital slot, where a cable neighborhood already established by Loral’s competitors exists.
Skynet carries a large number of channels for the satellite broadcast services unit of France Telecom, Globecast, on Telstar 5. Globecast is a pioneer in the trend to providing ethnic programming platforms for national broadcasters who want to reach viewers outside their home base. Telstar has another customer catering to the ethnic programming market. Pittsburgh International Telecommunications operates an ethnic neighborhood on Telstar 5 for ethnic channels from India, Israel, Kuwait, Thailand, Turkey and Vietnam for customers in the United States.
Outside North America, Skynet has a strong relationship with Netherlands-based cable company UPC, which has capacity on Telstar 12. In Asia, Loral hosts the consortium HBO Partners on its Telstar 10 capacity. In Latin America, Loral is building a relationship with Brazilian media company TV Globo in preparation for the launch of the new Estrela do Sul satellite in 2003.
Taking Ethnic Broadcasters Global
Globecast Europe earns 300 million Euros (U.S.$297 million) a year providing platform and permanent services to satellite broadcasters. Its customers include some of the largest broadcasters such as French TV operator TPS, BBC World, CNN, Euronews and Greek broadcaster Alpha TV.
Globecast does not own satellites but leases capacity and then sells platform services to broadcast customers who run their own bouquets and sell programming directly to viewers, often with the help of Globecast. The company entered the broadcast platform business using capacity leased from Eutelsat on its Hot Bird system. In North America, the company launched a DTH platform five years ago on Telstar 5, and three years ago expanded to Eutelsat’s Eurobird capacity as well.
Globecast operates four platforms on the Hot Bird satellites, including three that are uplinked from Paris and one from London, for Europe-wide distribution of their signals. “What makes us different from satellite service suppliers is our worldwide presence. When we take Euronews, for example, on Hot Bird, we also take them on Eurobird and on the Telstar 5 platform,” says Bertrand Persehaye, Globecast Europe’s senior vice president of sales
Eutelsat, which declined to be interviewed for this story, operates its Hot Bird satellites at 13 degrees E, where it delivers TV to 62 million homes in 39 countries in Europe, North Africa and the near Middle East.
Persehaye says the trend toward global distribution of national or ethnic programming is not just motivated by more money to be earned, but also by cultural or national interests as is the case of public broadcasters.
Customers like Japanese Satellite TV use the Globecast hot bird platform to reach Japanese nationals who are living in Europe. In addition to space capacity, Globecast manages the network’s conditional access and authorizes consumer receivers for viewing.
Globecast has expanded into Africa with C-band capacity on New Skies Satellites NSS 803 and into Latin America via another New Skies satellite, NSS 806. Its African services became available on smaller dishes in May when Globecast began using Ku-band capacity on the Eutelsat W4, uplinked from the company’s international teleport in Madrid to provide access to 90-cm dishes. African broadcaster NetTV, a customer for the Ku-band capacity, is able to take advantage of an African cable neighborhood that has formed around the W4 position due to the lease of five of W4s’ transponders from Eutelsat by another broadcaster, Multichoice.
Ku-band services into Latin America were initiated in late 2001 using Hispasat 1C to transmit to smaller dishes. “With Hispasat Ku-band from Europe, we are in the early stage and are building the community knowing Hispasat 1C will be replaced by a much more powerful satellite within a year, on Amazonas. We are counting on Amazonas to have a larger penetration of the market,” Persehaye says.
Building A Base In North America
In North America, Globecast foresaw several years ago that offering teleport-only services would die eventually as a business model and that diversification into other services was needed. In the late ’90s the company began concentrating on developing MCPC satellite platforms, taking advantage of digital compression to offer more tailored distribution capabilities for different business segments including broadcast, enterprise and Internet.
In the United States, Saudi Arabia TV was the company’s first customer, using Globecast to reach Saudis living in the United States with free to air programs from their home country. Today, the customer list includes Deutsche Welle’s German TV, TV Polonia, Armenian TV, Euronews, ANA and Abu Dhabi, among others. Globecast provides consumers with their antenna, receiver and smart card for a $299 equipment cost. The viewers pay a monthly subscription fee, which Globecast collects as the subscription manager and then passes along to the programmer.
Besides offering program origination and language conversion services, Globecast has a full call center with operators who speak many languages, just like its customers.
“We are the third largest DTH provider in the States now. We give ethnic viewers the ability to watch their national TV. The model has been very successful as far as commercializing this concept,” says Robert Behar, president and CEO of Globecast America. He says an estimated 250,000 to 400,000 households watch programming from the platform, which has grown from providing one channel in 1998 to 46 TV and radio channels today. The world TV service uses five Ku-band transponders and should expand to a sixth by year- end.
Behar sees the market for foreign broadcast distribution growing at 30 to 35 percent a year. The content owners benefit from lower costs and the expertise of dedicated satellite professionals. “If you are a small channel just starting out with one signal, someone will take care of the engineering costs and capital expenditure costs and charge you a monthly fee. You can concentrate on doing your broadcasting, making your product the best you can. It’s a no brainer,” Behar says.
The Skies The Limit
New Skies Satellites NSS 806 is one of the preferred options for broadcasters and programmers who want to reach a large Latin American audience that also extends to Spanish and Portuguese speaking markets in Western Europe. The satellite was developed initially around the Argentian market. The uniqueness of NSS 806 is the bouquet of national broadcasters and programmers from Argentina, Bolivia, Brazil, Colombia, and Peru combined with other programming from the United States and Europe into Latin America. About 4,000 cable headends in Latin America look at NSS 806.
New Skies provides about 120 video programs ranging from sports and movies to religion on the satellite. Some of the customers on the satellite are Artear, TyC, Pramer, Telefe, ATC, TV Globo, National Geographic Brazil, Casablanca, Televen, TV Sur, America TV, Globovision, Telecaribe, RCN, Inravision, CityTV, ATB, Globecast, etc.
NSS 8 is in development as a new cable bird, with coverage of all of the Americas including all of the United States (and Hawaii), Canada, Mexico, Central, South America and the Caribbean.
Developing New Neighborhoods
Spacecom, the operator of the Israeli Amos satellites, provides services to customers in Europe and the Middle East. The Amos 1 satellite provides DTH services in Israel and distribution services to cable headends in Central and Eastern Europe. It transmits about 130 channels on 16 transponders. In early 2003, the Amos 2 satellite will be collocated with Amos 1 satellite at 4 degrees W.
The Amos 2 satellite also will cover the East Coast of the United States and will provide connectivity between Europe and the Middle East and America. “Sixty percent of its 22 transponder capacity is already leased to customers in Israel and Europe. The Amos 3 satellite will join Amos 1 and Amos 2 at 4 degrees W in 2005-2006,” says David Pollack, CEO of Spacecom.
Spacecom earns about $2 million per transponder per year for the services.
Dozens of television programs are carried by Amos 1 for delivery to both DTH users and cable headends in Israel and in Europe, including HBO, Canal +, CNN, BBC, Sky News, Discovery, National Geographic, Eurosport, Fox Kids and many others.
“Amos 1 became a hot bird following the introduction of the DBS services in Israel in year 2000. Today hundreds of thousands of viewers in Israel have a satellite dish directed to 4 degreesW,” according to Pollack. “The DTH audience size in Israel is about 300,000. The cable audience size in Europe and the Middle East is about 10 million.”
Broadcasters continue to rely on satellite fleets to distribute programming around the world. New users have emerged, their needs are slowly growing, and the satellite community is creating new neighborhoods of valuable orbital real estate for the cable community in response.
Theresa Foley is Via Satellite’s senior contributing editor.