DBS Starts Early Push for 98

2/01/1998 7:00 PM Eastern

Direct-broadcast satellite companies are riding the wave of
last year's hefty subscriber growth right into the new year. Fresh from the success
of their fourth-quarter marketing promotions, DBS firms plan to spend heavily on national
TV and print ads again in 1998.

In addition to starting earlier and spending more money,
some DBS companies are taking the gloves off when it comes to competing directly against

'We're looking at where our new subscribers are
coming from,' said DirecTv Inc. president Eddy Hartenstein. 'Two-thirds today
come from cable. You'll see that as a major theme this year.'

And they'll do so earlier in the year than ever

PrimeStar Partners L.P. already launched a splashy new
30-second TV spot, called 'Runaway Pipe,' during the ratings-grabbing Super Bowl
late last month, which cost a cool $1.3 million.

DirecTv ran a two-page ad spread on the inside front cover
of Video magazine's February/March issue, instructing readers, 'You might
want to read this before you pay next month's cable bill.' The company was also
in production last week for a new TV ad campaign that it expects to launch later this

U.S. Satellite Broadcasting intends to continue its
branding campaign with national TV spots and its educational efforts with print ads
targeted more directly to heavy video users.

And EchoStar Communications Corp. will run its 'Dish
Network Is the Only One' ad campaign to promote its new digital local-channel service
in select markets. The company started test-marketing the campaign last month in Atlanta
and Washington, D.C., with local print and TV ads.

DBS-system sales have typically reached their peak at the
end of the year, when consumers tend to spend more on big-ticket purchases. As hardware
prices drop and DBS is more readily seen as an alternative to cable, DBS companies are
testing the waters to see if aggressive promotions during the rest of the year will mimic
the heavy sales trends of the holidays.

Denny Wilkinson, senior vice president of marketing and
programming for PrimeStar, said that because PrimeStar so far has leased, rather than
sold, its hardware, 'we didn't have the burden of seasonality' that some of
PrimeStar's DBS competitors did. The company deliberately started its 1998 campaign
early in the first quarter, and it will continue to market aggressively, Wilkinson said,
because, 'The customer brought in during January is more valuable to us than the one
brought in the following December.'

At a press conference last month, Hartenstein said
DirecTv's budget will increase significantly during 1998. DirecTv plans to sustain
the promotional level that it achieved during last year's fourth quarter throughout
all of this year.

'We plan no less than eight separate promotions to
help build awareness and drive consumers into retail,' Hartenstein said.
'We're spending this now as an investment in long-term customers.'

Small-dish satellite systems are no longer just a seasonal
business, said Bob Lawrence, executive director for Associated Volume Buyers.

DirecTv believes so much in the power of promotion that it
has pushed back its financial breakeven point so that it can help to fund subscriber
acquisitions with more marketing dollars.

While all of the DBS companies plan to market against cable
this year, each differs in its approach.

EchoStar, which has been the most visibly anti-cable in its
ads, will likely continue with the tactic, according to Mary Peterson, vice president of
consumer marketing. Speaking at a marketing panel sponsored by the Satellite Broadcasting
and Communications Association last month, she said, 'We're going to go hand and
fist against cable.'

In the past, EchoStar has used very targeted print ads to
drive sales of its systems in markets with rising cable rates. Now, the company is telling
consumers to 'quit hanging onto cable' in Washington-area newspaper ads
introducing its new local-channel service.

'Every time we spend a dollar out there, we want to
make a sale,' said Peterson.

USSB, on the other hand, takes a two-level approach, said
Mary Pat Ryan, the company's senior vice president of marketing. She said that while
image-building campaigns might not bring immediate sales, they do play a direct role in
bringing in new subscribers over time. The company plays a balancing act of educating
consumers on the benefits of USSB's multichannel premium-movie services and building
the Digital Satellite System category as a whole.

Last year's USSB campaign focused on the power of a
good movie experience, Ryan said. 'We've grounded it this year as something that
you won't find on cable,' she added. 'We'll continue the comparison,
but we're not knocking cable directly. We're trying to give consumers a
perspective that's relevant to them.'

As consumer awareness of DBS continues to grow, those
comparisons become more effective, Ryan asserted. 'People leave cable for DSS. We
know that people look at the programming content and make direct comparisons.'

Even PrimeStar will encourage consumers to compare the
company's satellite service against cable. The company will highlight its top J.D.
Power rating in its ads.

'We make it clear that we're rated No. 1 of any
cable or satellite TV service,' Wilkinson said.

Cable MSO-backed PrimeStar will spend $50 million on
network television and $150 million in its overall marketing efforts by the end of the
year. That budget will also include marketing the company's entry into high-power DBS
if PrimeStar is granted licenses from the Federal Communications Commission.

With or without high-power, PrimeStar does not plan to bash
cable anytime soon.

'We don't think that every time that cable has a
rate increase, we can call cable names, as our competitors do,' Wilkinson said.
'We will be aggressive against cable. We just choose to do so differently' than
some other DBS companies.

Hartenstein, too, said DirecTv does not believe in
cable-bashing or negative campaigns.

And Ryan said she doesn't think that there's a
need to knock cable directly.

'Let cable just bring themselves down,' she said
last week, adding that if cable companies continue to raise rates and to make false
promises about digital cable and service quality, they'll do enough harm without any
help from DBS.

Negative ads have been known to backfire if consumers
remember the advertiser for being mean-spirited, rather than for having a superior offer.

Barbara Sullivan, president of Denver-based B.G. Marketing
Inc., said DBS companies are running anti-cable ads the only way that they can -- by
leveraging off anti-cable feelings that already exist.

'With consumers, you're often dealing with
inertia,' Sullivan said. 'It's a question of energy overcoming apathy. If
you remind them that they don't like the cable company, it might help.'

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