With a technology foundation firmly laid in providing broadband services to train riders in Europe, RaySat has turned to the U.S. marketplace with a different target in mind: the growing in-vehicle entertainment industry.

The company hit the ground running stateside with a pair of products, the first of which will be shipping soon, and it plans to have more new products and services on the way. Company executives believe this strategy will catapult RaySat to the top of the in-vehicle entertainment market.

Raysat’s products focus on providing satellite television service to vehicles, a market in which it competes with KVH Industries. But unlike its competitor, RaySat’s satellite television service offers more options. The first product to market from RaySat is a 5-inch, roof-mounted antenna — “the only one that does both DirecTV and Dish,” RaySat President and CEO Samer Salameh told Satellite News, referring to the direct-to-home (or, in this, case direct-to-vehicle) satellite television services offered by The DirecTV Group [DTV] and EchoStar Communications Corp. [DISH], respectively. “We are starting to ship that product in about three weeks from [Nov. 23].” While not divulging specific numbers, Salameh said his company has pre-sold “thousands” of those antennas.

With regard to the specs of the antenna, it has both circular polarization and linear polarization along with a 20-degree-to-70-degree view angle, so it works across North America, Europe and Asia. “The only competing product is KVH, and they only do 30 to 70 degrees. That 10-degree difference means basically the whole northern part of the United States and all of Canada, and they cannot see the Dish Network satellites,” Salameh said. He also noted that the RaySat antenna can switch between satellites, allowing it to receive a signal from any Ku-band satellite over the United States.

But what has Salameh excited is what is coming soon. “The latest addition to our product portfolio is a 2-inch aftermarket product,” he told us. That 2-inch antenna is serving as a proof of concept for what comes after: a 1-inch, in-roof OEM product. Salameh said the company has a working model of the 2-inch antenna, but it won’t be commercially available until the end of next year.

But that is just the beginning. “Every six to 12 months, you can expect a major new product release from us,” Salameh said, adding that his company has more than 80 engineers working in the research-and-development department. “Once we start getting to market, we should emerge as the lead player.”

The Market Opportunity

“Our addressable market is the SUV and the minivan population,” Salameh noted. “If they happen to be a Dish or DirecTV customer, it’s that much easier for them to buy the product.”

According to Salameh, out of the 17 million vehicles sold in the United States every year, around 8.8 million are SUVs and minivans. “Of those 8.8 million, we have gone through the analysis of size, price, who’s buying them, etcetera. There are about 4.7 million bull’s-eye customers – customers who have a vehicle that is large enough or expensive enough so that a $2,000 purchase is less than 5 percent of the purchase of the car,” he said, adding, “Or they have what we call a ‘target customer,’ which are kids 10 years or younger sitting in the back seat of the car. If only 10 percent buy the product, that is almost half a million vehicles per year, which is huge.”

Salameh estimated that about 30 percent of the 4.7 million “bull’s-eye” customers already have satellite television at home, based on the percentage of satellite TV subscribers in the United States right now. It would cost them just about $5 more per month to add the car receiver to their subscription package. For those who don’t already subscribe, it would be about $35 per month for the basic service. “I’ve got kids. The price of silence in the back seat is worth $35 per month,” Salameh said.

But the value proposition he presents goes beyond just TV in the car. In some ways, his service is also targeting in-car DVD players, particular on short local trips. “Now a 20-minute ride becomes 17 minutes of watching TV versus a 20-minute ride with a DVD — one which isn’t going to happen because you don’t put in a DVD on unless you are on a long distance ride,” he explained.

Salameh said the company is talking to a wide variety of major car manufacturers regarding offering Raysat products as factory-installed options, but he declined to offer any more information on the progress of the conversations to date.

And Salameh is not worried about increased competition in this space. “The barrier to entry is pretty high,” he said. “This is not an easy product to make. The expertise and know-how to do this is relatively difficult and, unlike the rest of the telecom market, this is a niche telecom product. You don’t have an unlimited supply of engineers to throw against us.”

But he is not discounting the possibility of someone else throwing a hat into this ring. “I’ve worked with enough startups and enough [venture capital groups] to know that if you throw enough money at a problem, you solve it,” he said, adding his company is “fully prepared” to take on any newcomers if one were to emerge.

(Christine Valmassei for RaySat, 703/264-9071)