EchoStar’s 10M-Sub Milestone Masks Competitive Threats

Englewood, Colo.-based EchoStar Communications [DISH] achieved an enormous milestone last week when it reached the 10-million subscriber mark. However, the company’s praiseworthy accomplishment is clouded by rising competition that most certainly will prevent it from adding new customers at the same pace that helped it to obtain 10 million customers during its first eight years of existence.

Jimmy Schaeffler, a satellite television analyst who heads The Carmel Group consulting firm in Carmel-by-the-Sea, Calif., said, “The first five million subscribers are the easy ones. The next five million were quite a bit more difficult. The next five million will be remarkably hard to gather.”

Two key reasons for the company’s dimmed growth outlook are the saturation of the multichannel market place, and the competition for new and existing subscribers, Schaeffler said.

Media mogul Rupert Murdoch’s purchase last December of EchoStar’s biggest U.S. satellite TV rival, DirecTV, is a competition-changing development, Schaeffler explained. The acquisition, conducted through Murdoch’s News Corp [NWS] empire, gives DirecTV the backing of new ownership that is a multichannel television and broadcasting powerhouse.

News Corp has a global presence, combined with many layers of sophistication and experience in multichannel television, that will build “a big wall” for EchoStar to climb over to sustain its growth, Schaeffler said.

EchoStar’s Optimism

Despite generally fading growth prospects for EchoStar, according to analysts on Wall Street and elsewhere, the second-largest high-powered satellite TV operator in the United States is looking to capitalize on its strengths as a low-cost, all-digital service.

Cable customers still have compelling reasons to switch to EchoStar — to save money and to obtain digital service — said EchoStar spokesman Steve Caulk. EchoStar also will continue to attract large numbers of subscribers by listening to the television-viewing public and by responding with products and services that they demand, he added.

“For instance, during Dish Network’s rapid sign-up of its first 10 million customers, we learned that subscribers want local, national and international channels with customer service that meets and often exceeds their needs,” Caulk said. “Also, we know viewers crave options and, at Dish Network, we strive to meet every challenge from our customers.”

To woo cable customers, EchoStar has expanded its delivery of local channels to 133 local markets, and that number is growing by the week. No other pay-TV operator can match that level of service, Caulk claimed.

Dish Network’s technology also penetrates rural areas cable companies cannot or will not reach, Caulk said. Indeed, that is an advantage held by all the satellite-TV service providers that can provide point-to-multipoint broadcasting capabilities nationwide. EchoStar also is “the U.S. forerunner” in interactive television, Caulk added.

Cable Bashing

EchoStar also has built a national distribution network of local retailers, and it uses regional call centers that provide “highly rated” customer service 24/7, Caulk said. That level of customer service has been documented repeatedly in independent surveys that compare satellite TV services to their cable rivals.

The rollout of new equipment to enhance the viewing pleasure of subscribers is another way EchoStar is planning to entice new subscribers.

“The Dish Player Video-On-Demand service highlights our digital video recorders, allowing viewers to pause, fast-forward or rewind, store recorded programming, create instant replays and skip commercials,” Caulk said.

Besides offering standard definition digital satellite TV channels to all subscribers, the Dish Network has begun offering its subscribers high definition television programming through a range of equipment options that include the Dish 811, the Dish Player-DVR 921 and Dish Network’s 32-inch or 40-inch HD monitors, Caulk said. EchoStar’s current HDTV channels include HBO, Showtime, CBS and Discovery HD, HD Net, HD Net Movies, TNT-HD, ESPN-HD and Pay-Per-View.

However, Jericho, N.Y.-based Rainbow DBS launched a rival HDTV-oriented satellite TV service that offers a combination of 36 HD channels and 84 standard-definition channels in the 48 contiguous states (SN, June 14, p. 1). Neither EchoStar nor DirecTV come close to matching up channel-for-channel with Rainbow DBS and its VOOM satellite TV service.

One area on the programming side where EchoStar has excelled is in international programming. The Dish Network currently offers more than 60 international channels in more than 25 languages.

“At Dish Network, we are determined to build upon our success of the first eight years by carrying on our tradition of providing innovative technology, quality products and responsive customer service – all at the lowest price,” Caulk concluded.

–Paul Dykewicz (Steve Caulk, EchoStar, 303/723-2010; Jimmy Schaeffler, The Carmel Group, 831/643-2222)