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Study Sees DBS Growth

A new Kagan Research study projected that satellite distribution will hit more than 33.5 million homes by 2015.

In The State of DBS, Kagan said it expects solid subscriber growth from direct-broadcast satellite in the near term, waning a few years out as local-into-local and HD local penetration matures. At the end of the 10-year horizon, Kagan projected that satellite will notch more than 6 million new subscribers to total more than 33.5 million by 2015.

As telcos come online with their video products, the effect is expected to be similar to that of the last 10 years, with the new platform driving deeper multichannel penetration and expanding the market, according to Kagan. The primary effect, however, will be to further diminish cable's share to 61% while increasing multichannel homes by nearly 20 million.

"Despite the lack of a competitive solution to the return-path issue, DBS [direct-broadcast satellite] will continue to be a major player in the multichannel market through its established base and strategy of targeting underserved markets such as rural areas and international communities," Kagan senior vice president Derek Baine said in a prepared statement.

"In addition, new technologies are making features such as VOD [video-on-demand] and interactive -- once the sole domain of cable -- available via satellite and narrowing the competitive divide,” he added. “And with the launch of new satellites, DBS operators will have more capacity to offer more high-definition channels in the near term than their counterparts."

Other key findings and projections included:

• In 2005, subscriber additions to DBS declined 29% from the previous year as the satcasters were hit with higher churn and increasing competition. The start of 2006 continued the trend with first-quarter net adds down 50% year-over-year at DirecTV and 31% at EchoStar Communications. Full-year results are expected to be 1.8 million net adds, 22% below 2005 totals.

• The multichannel pie has expanded significantly over the past decade, growing 38% from 68 million at the end of 1995 to 93.8 million at the end of 2005 (before netting out cable/DBS duplicates). But DBS' addition of nearly 25 million subscribers over the past 10 years has shrunk cable's share of the market by more than 20 points.