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Luring subscribers to DBS

When DirecTV and EchoStar's DISH Network began offering local network affiliate signals last December, that was only the first in a range of services calculated to woo subscribers away from cable. Not only does each also offer two HDTV channels, but both have plans for broadband Internet and other interactive services.

Meanwhile, the two DBS providers are seeing some results from the addition of local signals. Terry Ferguson, vice president in charge of business development and strategic planning for DirecTV, estimates that subscriber gains are 20% to 50% greater in markets where local is offered. For DISH, reports Director of Marketing Rob Arnold, about half of new first-quarter customers are paying the extra $4.99 a month for local service.

Ferguson reports that DirecTV has grown from 4.7 million subscribers in March'99 to 8.3 million in March this year. The 1999 figure does not include the acquisition of Primestar, which accounts for 745,000 converted subscribers and some 1 million still unconverted. She notes that 405,000 new subs were added in the first quarter this year, a 33% increase over subs added in the year-ago quarter.

DISH added 1.4 million subs last year, according to Arnold. He hopes for a big boost from the Digital Home Plan, which launches May 1. It offers 150 channels, two receiver boxes and free in-home service for $49.99 a month; a $99 installation charge includes the first month of service. The length of the special offer will be based on results, he notes, but pricing is guaranteed until May 1, 2003.

Arnold figures that some Primestar customers have jumped to DISH but has no solid evidence. Asked when he expects DBS to reach a saturation point, he replied, "There are 65 million to 70 million cable households, so we still view ourselves at the embryonic stage of development. Cable households have been reduced by about 13 million since the introduction of DBS six years ago."

Ferguson agrees with Wall Street analysts'estimates that the total DBS market will reach 30 million to 35 million: "That's nearly double what they thought when we first rolled out."

DirecTV hopes to push this growth with about $150 million in advertising expenditures across all media. Arnold declines to give figures but says the DISH advertising budget is up from last year and will concentrate on the 28 markets that are offered local service so far.

With four satellites planned for launch by 2003, DISH will be offering a range of new programming. This includes a 256K broadband Internet service and an arrangement with OpenTV for interactive services, such as games, local weather and shopping.

DirecTV plans additions such as Wink Enhanced Broadcasting, which offers interactive data from more than 20 programming networks; TiVo Personal TV, which allows time-shifting and other VCR-type capabilities; AOL-TV, providing access to major AOL services; and DirecPC, a broadband Internet service.

Most of the planned DBS services require additional set-top boxes or new combined receivers and are expected to be in place by the end of the year.

Digital ready/No one has broken the 15% barrier. However, some of the smaller MSOs have made more progress.

Slow-speed Internet/ No cable operator is very impressive in successfully selling service to its Internet-ready homes.