DBS Starts Year with Strong Jan.2/14/1999 7:00 PM Eastern
The direct-broadcast satellite industry started the year
with a surprisingly strong January, adding well over 200,000 new subscribers for the
EchoStar Communications Corp. pleased Wall Street with its
reported 100,000 acquisitions for its Dish Network service, doubling the 50,000
subscribers that it signed in January 1998. Analysts credited EchoStar's aggressive
free-hardware promotion with driving up its subscriber count.
At the end of January, EchoStar's customer base
totaled 2.04 million.
That still pales by comparison to industry-leader DirecTV
Inc., which had 4.55 million subscribers at the end of last month after signing up 91,000
during the month -- a January record for the company.
Even struggling PrimeStar Inc., which agreed to sell its
customer base to DirecTV last month, showed some post-holiday momentum, adding 24,000
subscribers for a total of 2.32 million at month's end.
January follows a record December for the DBS industry,
when DirecTV added 183,000 homes, Dish Network posted 130,000 and PrimeStar tallied 36,854
net new subscribers.
Steve Blum, president of California-based Tellus Ventures
Associates, attributed some of the January success to a hangover from December.
"You've got some people who received a [DBS set-top] box for Christmas and had
the product installed in January," he said.
But Lehman Bros. Inc. analyst Bob Berzins said the strong
January numbers are a sign that the industry is picking up steam, and he doesn't
anticipate a sales slowdown anytime soon.
Rick Borinstein, senior vice president of merchandising for
RadioShack, said the retailer remains "absolutely bullish on direct-to-home"
satellite, and it is looking forward to record sales in the category in 1999. The company
markets both DirecTV and PrimeStar systems, and it had a good month with both in January.
In one recent newspaper circular, RadioShack advertised
PrimeStar and DirecTV side-by-side, promoting satellite TV for about $1 per day.
"We're telling customers that the popcorn costs
more than that," Borinstein said.
RadioShack has no plans to add EchoStar's Dish Network
products once it stops selling PrimeStar, Borinstein said, but it will strengthen its
focus on DirecTV.
There's no guarantee yet that DirecTV's plans to
buy PrimeStar will go through, although the deal received Hart-Scott-Rodino antitrust
clearance from the federal government last week.
PrimeStar bondholders, unhappy with a buyback offer of 67
cents on the dollar, could hold up the deal, although some analysts believe that the
agreement with DirecTV is PrimeStar's best chance to offer any value to its lenders.
The bondholders were said to be negotiating with PrimeStar officials to see if the company
would pay them more to avoid a lawsuit.
Others in the DBS industry are not waiting for the deal to
close before trying to convert PrimeStar customers to their own service. EchoStar started
an aggressive dealer-incentive program Feb. 1, designed to steal as many PrimeStar
subscribers as possible before DirecTV takes ownership of them.
And Pegasus Communications Corp. will begin a new consumer
program this week aimed at bringing DirecTV to the 250,000 or so PrimeStar customers who
live within its National Rural Telecommunications Cooperative territories.
Pegasus will offer a free DirecTV system, including
professional installation, to customers who commit to a year's worth of programming.
The DirecTV reseller will also offer a rental option on equipment.