Direct-broadcast satellite providers and retailers were
tweaking their marketing plans last week to support sales of local-broadcast satellite
packages in some 14 markets to be launched within days of the underlying bill becoming
law.
Local-to-local legislation didn't come in time for
"Black Friday," the day after Thanksgiving, which is traditionally among the
strongest sales days of the year for retailers. But DirecTV Inc. and EchoStar
Communications Corp. expect to market their local-to-local packages aggressively in time
for the holidays.
DirecTV will offer local broadcast stations in New York and
Los Angeles "almost immediately" after President Clinton signs the bill into
law, according to senior vice president of new ventures Steve Cox. The signing is expected
today (Nov. 29).
The DBS company already uplinks broadcast channels from
both cities to serve as distant network signals for customers outside of the range of
off-air signals. But now, any customers within those DMAs will be able to buy local
channel packages without having to prove that they can't get acceptable pictures with
antennas.
Within one week to 10 days of the New York and Los Angeles
launches, DirecTV will also offer local service in Denver, Detroit, Miami, San Francisco
and Washington, D.C.
Cox said the DBS-market leader would roll out more
local-to-local markets throughout December in a systematic manner, giving the company time
to gear up its back-office procedures for authorizing the service.
DirecTV plans to make local channels available in 20 to 25
markets by the end of this year or early 2000, Cox said, which would put the service offer
in front of about 50 million households.
EchoStar already uplinks local broadcast signals from 13
markets: Atlanta, Boston, Chicago, Dallas, Denver, Los Angeles, Miami, New York, Phoenix,
Pittsburgh, Salt Lake City, San Francisco and Washington, D.C.
To date, EchoStar and its retailers have had to include
disclaimers in marketing materials, saying that the service was only available to certain
subscribers. Following final passage of the bill, they'll be able to tout the service's
widespread availability. "Let the floodgates open," EchoStar spokesman Marc
Lumpkin said last week.
The company is expected to name its next 17 local-to-local
markets once the bill is signed. EchoStar plans to serve 30 markets with local signals by
the end of next year.
DirecTV, too, expects to add more local-to-local markets
next year, using additional orbital spectrum at 119 and 110 degrees west longitude.
The National Rural Telecommunications Cooperative -- which
resells DirecTV programming in certain rural and exurban territories -- would not be able
to sell local packages from 119 or 110 under its current contract with DirecTV.
Cox said NRTC members, which include Pegasus Communications
Corp., also do not have rights to market local programming from San Francisco, Miami and
Washington, D.C. That's because they're beamed from the five transponders formerly
controlled by U.S. Satellite Broadcasting, which the NRTC also does not control.
Cox added that consumers can buy local programming directly
from DirecTV in areas where the NRTC does not have marketing rights, just as DirecTV now
sells former USSB premium channels directly to consumers in NRTC territories.
Broadcast signals in the top 20 to 25 markets will gain
carriage at DirecTV's core platform at 101 degrees west longitude.
EchoStar has not yet announced how many local markets it
will serve from its core service at 119, although New York and Los Angeles stations are
already uplinked there to serve distant network subscribers.
Initially, most local signals were sent to satellites that
required customers to buy second 18-inch dishes. But many of those channels have since
moved to a satellite at 110 degrees, which serves the company's new "Dish 500"
hardware platform.
Lumpkin said customers in a few East Coast markets still
have local channels delivered to second dishes from a satellite at 61.5 degrees, but those
signals could also move to 110 over time.
EchoStar was putting a hardware-upgrade plan in place last
week for current Dish Network subscribers who want to add local channel packages. Current
customers can use the same Dish Network receivers they already own, but they would need to
upgrade their antennas in most cases.
DirecTV subscribers residing beyond the top 20 to 25
markets would need both new antennas and receivers. But the company made the strategic
decision to put as many local markets up on its core service as possible.
"As much as possible, we want to make these channels
available without any new effort on the part of our customers," Cox said, adding that
he believes the service will appeal to existing subscribers, and not just new customers.
For DirecTV subscribers who buy broadcast-basic tiers from
their cable operators, the local-to-local packages will "give them an incentive to
once and for all cut their cable ties," Cox added.
DirecTV will charge $5.99 per month for the local broadcast
package, which in most cases will include the local ABC, CBS, NBC and Fox feeds, plus a
national PBS feed. Cox said the fee is lower than what most cable customers pay for
broadcast basic from cable.
EchoStar's local-broadcast package, which also includes a
national PBS fee, costs $4.99.
DirecTV has completed some retransmission agreements, most
contingent upon final passage of the bill. "The negotiations have come in a variety
of flavors," Cox said.
Network discussions are following the traditional cable
retransmission model in many cases, with networks requesting carriage of their affiliated
cable channels, as well as a role in deciding how those channels are priced and tiered on
the DBS services.
Cox admitted that in some markets, DirecTV may launch local
packages without some of the four major-network affiliates "where we are concerned
about the risk of adding a service and having to take it down" after six months, when
DBS providers are required to have retransmission agreements in place.
Sticking primarily with newspaper ads rather than
television spots will allow DirecTV to start advertising the local channels almost
immediately, as well as to customize the ads with the specific stations available and with
local retailer tags.
RadioShack will offer local channels as soon as the bill is
signed and the service is available, senior vice president of merchandising Rick
Borinstein said. But because DirecTV won't offer local independent stations initially,
RadioShack will continue to sell antennas to customers who care about receiving all of the
local stations.
"This will open up a certain number of customers who
either don't want to keep lifeline cable or don't want to use an antenna," Borinstein
added.
Buddy Davis, owner of Waldorf, Md.-based Davis Antenna, has
been marketing EchoStar's Washington, D.C., broadcast package to eligible customers for a
while already. He believes that at least in his market, off-air antennas are still a
better bet for most consumers. In New York or in mountainous areas where broadcast signals
face more interference, local broadcast over satellite might hold more appeal, he added.
Online retailer ROXY.com Inc. has a database of thousands
of potential customers who've expressed interest in buying DirecTV systems once local
broadcast signals become available in their markets, according to Patrick Hudgin,
president of its home-entertainment group.
"We expect our [DirecTV] sales volume to double next
year," Hudgin added, "largely due to this legislation."
