DBS Retailers Ring Up Strong Holiday Sales

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While sales of satellite dishes remained fairly strong this
holiday season, smaller retailers complained that they were getting squeezed by the big
chains. And even the larger stores said discounting has cut into their profit margins.

Although this past holiday season may have seen the highest
number of direct-broadcast satellite system sales to date, some DBS retailers are
nostalgic for the days of Christmas past, when they could actually make a profit in the
category.

'The first Christmas that we sold it was outstanding
for us,' said Billi Heffner, store manager of The Antenna Shop in Lenhartsville, Pa.
'As more and more chains became involved, sales dwindled.'

Sales of both Digital Satellite System and PrimeStar
Partners L.P. equipment were 'very strong all through the holiday' at
RadioShack, said Rick Borinstein, the company's senior vice president of merchandising.
But, he added, while unit sales rose,

gross revenue did not, since DSS is selling at about one-half the price of a year ago.

RadioShack promoted the DBS category aggressively during
the holidays, and Borinstein said the retailer will continue to do so during 1998.

But the mom-and-pop stores felt the biggest sting.

Heffner said her store has lost some DSS sales to chain
stores like Circuit City and Kmart that can afford to advertise the category heavily. To
add insult to injury, some DSS advertisements from manufacturers and program providers use
tag lines telling consumers to go to Circuit City or Best Buy for DSS.

'The satellite dealer is really not promoted
anymore,' Heffner said.

Smaller retailers had to contend not only with holiday ads
from larger retailers, but also with anti-DBS ads from some cable companies around the
country.

Kevin Leslie, owner of Leslie Engineering in Albion, Ill.,
said local cable companies ran daily quarter-page ads slamming small dishes.

'It would take 100 DSS sales to pay for one of those
advertisements,' he said.

But some small retailers reported good news.

Rik Hawkins, owner of Starpath of Hardin County in
Elizabethtown, Ky., said holiday DSS sales were brisk, peaking about one month before
Christmas.

'This is the first year we felt that DSS was actually
a gift,' Hawkins said.

This year, all three DBS companies offered installation
discounts and free self-install kits as part of their holiday promotions. For larger
retailers looking to give consumers one more reason to buy a dish during the holidays, the
promotions were effective. But some specialty retailers that prefer to sell
custom-installation services at a premium shied away from the focus on installation
discounts.

'Our avenue for DSS isn't your average'sell it
and give them a free install kit,'' said Charlotte Fontenot, co-owner of Suburban TV
& Home Theater Gallery in Beaumont, Texas. 'Because of that, our actual unit
numbers were off from the heyday in 1994, when the price was $699 and you actually made a
profit.'

Suburban charges its customers DSS-installation rates that
include time and materials. Their clients are willing to pay extra to ensure that the
system is hooked up properly to their custom audio/video systems.

Because it focuses on custom installation, rather than
holiday promotions, Suburban didn't see the major peak in DSS sales during December that
other retailers typically do, said Fontenot.

Leslie Engineering's DSS sales were softer than expected in
December. The bulk of the holiday sales were made in November, Leslie added.

When asked if he would promote the category differently
next year, Leslie answered, 'There's not a whole lot that you can do. With the way
margins are, you can't do much with promotions.'

Heffner said Christmas-gift sales are among the most
gratifying that a retailer can make. The Antenna Shop helped to surprise an elderly couple
during the holidays by scheduling a DSS installation for Dec. 22, 'right before
Christmas,' she said.

New England Audio -- which has stores under the Tweeter
etc., Bryn Mawr Stereo and HiFi Buys names in Boston, Philadelphia and Atlanta -- had a
very strong holiday season for DSS, said Bernie Sapienza, the company's vice president of
merchandising.

Sapienza said DSS-inventory levels at the stores 'are
just about right -- very few.' Most retailers like year-end levels to be low.
'These next few weeks are traditionally very quiet,' he added.

RadioShack expects to see a 'natural drop-off in sales
after the holidays,' said Borinstein. 'I wish I could clone Christmas.'

Because December sales were slower than anticipated, Leslie
has a bit more inventory on hand than he would like. But he won't hold a post-holiday
sales blowout, like some retailers do with other product categories. Leslie said he'd
rather hold on to extra inventory than sell it at a loss.

Sometime in mid-January, DBS sales could pick up again,
retailers said. 'Folks start to burrow in for the winter,' Sapienza said.

Hawkins agreed. 'Pay-per-view buy rates are good in
January and February,' he said, 'but the first week of January can be pretty
scary.'

Official December DBS-subscriber numbers had not yet been
released at press time.

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