Las Vegas -- The holiday season was a merry one for
direct-broadcast satellite players, as was all of 1998.
DirecTV Inc. posted a record month in December, acquiring
183,000 subscribers and reaching 4.46 million by year-end. The company ended 1997 with 3.3
million customers, after adding 180,000 subscribers in December 1997.
EchoStar Communications Corp. saw significant growth over
its 1997 numbers, adding 130,000 Dish Network subscribers last month, or 55,000 more than
the previous December. The company ended 1998 with 1.94 million customers and 1997 with
Only PrimeStar Inc. saw its subscriber acquisitions drop
from year-earlier December figures, adding 36,854 in 1998, compared with 40,000 in 1997.
It ended 1998 with 2.296 million customers, up only 350,000 versus a year ago.
PrimeStar president Dan O'Brien estimated that the
company signed more than 100,000 subscribers last month before churn. And since PrimeStar
closes its fiscal month on the 21st, its December numbers don't count the last few
days of the holiday selling season or sales from the busy week after Christmas. Its
subscriber count also excludes new orders awaiting installation.
Still, there's no question that PrimeStar is losing
ground in the fight for DBS market share. And after the company gave up its fight for a
robust high-power service at the 110 degrees west longitude spectrum, many analysts
believe that it's unlikely that PrimeStar can regain its footing.
Talk surrounding a possible buyout of PrimeStar's
subscriber base heated up again in recent weeks, but O'Brien denied that PrimeStar
was close to any announcement regarding a sale of the company. He said observers assume
that when a company doesn't seem to have a clear business plan, it's ready for
others to come in and "bottom-fish" by proposing a deal below market value.
O'Brien wouldn't comment on the level of
PrimeStar's discussions with DirecTV, but he said the company has been in talks with
a number of entities. O'Brien added that PrimeStar has a fiduciary responsibility to
look at any deal that will increase shareholder value.
DirecTV president Eddy Hartenstein declined to comment on
the matter. But sources close to Wall Street said last week that DirecTV's parent,
Hughes Electronics Corp., was seeking reaction to a possible buyout deal. Under one
scenario, PrimeStar would not be paid for subscribers that don't transition to
Some analysts estimated that as many as one-half of
PrimeStar's subscribers could drop out -- either through typical churn or to a
competing video service -- before a new owner could switch them to its own hardware
Charlie Ergen, chairman and CEO of EchoStar, said last week
that he was not in discussions with PrimeStar to buy its subscribers or access to 11
transponders at 119 degrees west. Ergen said EchoStar would not join in a bidding war to
keep PrimeStar's assets out of the hands of DirecTV.
Whatever happens with PrimeStar, many analysts now see DBS
as a two-horse race between DirecTV and EchoStar.
At last week's Consumer Electronics Show here, both
companies announced aggressive plans to seek new subscribers in 1999.
DirecTV and U.S. Satellite Broadcasting will team up on a
joint promotion offering $200 in free programming to new subscribers. The promotion is
slated to start Jan. 14 and run through Feb. 21.
EchoStar said it would extend its free-hardware promotion
to include a choice of two Dish Network systems. In the new campaign, which started Jan.
10 and runs through March, new subscribers can select from a $199 model or a $299 system.
Consumers will receive a rebate for the full suggested retail price after committing to
one year's worth of programming at $48.99 per month.
In other news from the CES, EchoStar and Microsoft
Corp.'s WebTV Networks said they would partner to introduce a broadband
Internet-over-satellite service sometime this spring. The two companies will help to
subsidize the cost of the combination WebTV/Dish Network box, which will retail for $499.
The set-top box will include a multigigabyte hard drive
that can pause and replay live programming in full digital quality, according to the
companies. The monthly fee for the broadband WebTV service will be $24.95. The companies
may bundle the service with Dish Network video packages in the future, if the market
demands it, Ergen said.
EchoStar will also deliver broadband Internet to personal
computers through a deal with manufacturer Gateway 2000 Inc.
DirecTV said last week that its hardware licensees would
build Wink Communications Inc.'s interactive-television technology into new set-tops
later this year. Wink's enhanced-television and e-commerce applications will be
offered free-of-charge to DirecTV subscribers. The deal represents the first national
distribution for Wink's service.
DirecTV will also back TiVo Inc.'s personal
television-on-demand service. DirecTV licensee Philips Consumer Electronics Co. -- which
also markets Dish Network hardware -- will build set-top boxes that incorporate both TiVo
and DirecTV technology. TiVo customers pay a monthly fee for the service, which offers
VCR-style features such as pause and rewind.
On the high-definition television front, EchoStar announced
that it would ship HDTV-capable set-top boxes for dealer demonstrations this spring, with
consumer products expected by fall.
And DirecTV announced that New Line Cinema has signed the
first agreement to bring HDTV pay-per-view movies to DirecTV subscribers. Initial HDTV PPV
titles will be available this spring.