On the heels of a record quarter for DirecTV Inc., rival EchoStar Communications Corp. has launched an aggressive strategy to sell branded HDTV sets for $999, and plans to shed its longstanding policy of forcing Dish Network subscribers to commit to one-year programming contracts.
Not only has EchoStar dipped below the $1,000 mark for the HDTVs, but it's also offering high-definition set-tops to customers for free.
EchoStar chairman and CEO Charles Ergen — perhaps eager to steal headlines from DirecTV and its new owner, News Corp. — also touted plans to drop one-year commitments for new customers, attacking a vulnerability versus cable, which lets customers drop service without penalty. Previously, EchoStar hit subscribers with a $140 fee if they cancelled subscriptions before the one-year contract period ended.
Ergen said EchoStar would subsidize the cost of the HDTV sets and receivers but expects the tactic to reduce churn and pay dividends in the long run.
"Some day we hope to make money," he said last Thursday at EchoStar's booth at the Consumer Electronics Show here.
For existing customers who already own HD monitors, EchoStar is offering its DISH 811 HD set-top for free. The boxes previously retailed for $399.
Cable & Telecommunications Association for Marketing CEO Char Beales, who toured CES with a group of about 40 cable executives, downplayed EchoStar's HDTV-box giveaway, pointing out the risk taken in subsidizing hardware. "I think it's a way to give them a loss-leader," Beales said.
Ergen acknowledged that the strategy would add to EchoStar's subscriber-acquisition costs, which currently run at about $500 per customer.
EchoStar cut a deal with Thomson Consumer Electronics to manufacture the televisions, which contain EchoStar's logo on the bottom of the front panel. Subscribers can choose from either a 34-inch tube type HD monitor or a 40-inch rear projection monitor.
In addition to the $999 offer, EchoStar is pitching a high-definition DVR capable of recording 25 hours of HDTV programming or 180 hours of standard definition shows, or a combination of the two. That DVR and HDTV set bundle costs $1,599.
EchoStar's announcement came on the same day DirecTV reported that it added 405,000 net new subscribers during the fourth quarter, the best performance in the company's history and a 39% improvement over the fourth quarter of 2002.
DirecTV picked up a record 3,006,000 gross subscribers in 2002, which worked out to 1.2 million net new customers after accounting for a monthly average churn rate of 1.5%.
Beginning Feb. 1, EchoStar's Digital Home Advantage plan will offer new subscribers free equipment, free installation and the company's local channels package for $29.99 per month — a $5 discount over the previous plan.
EchoStar also changed the names of its most popular programming packages to reflect new channels that have been added to the tiers. The America's Top 50 package becomes America's Top 60, and America's Top 100 becomes America's Top 120.
Ergen told reporters EchoStar will probably hike its rates for the programming packages this year, and the new rates may be tied to a renewal EchoStar is negotiating with Viacom Corp.