DBS Sales Heat Up Through July

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The direct-broadcast satellite industry continued its
heated acquisition push last month, with no signs of cooling down in sight.

DirecTV Inc. added 122,000 net new customers to its
high-power service, not counting the 52,000 PrimeStar by DirecTV customers it switched to
high-power. At the end of July, DirecTV had more than 7.4 million customers, about 2
million of which subscribed to the PrimeStar service.

And EchoStar Communications Corp. added 113,000 net new
customers to its Dish Network service last month, bringing its tally to 2.71 million.

Alpert & Associates president Mickey Alpert said
July's numbers would have been even higher if there had been more equipment in the
pipeline and more installers available.

In the first seven months of this year, DirecTV added
791,000 new customers, and EchoStar followed closely with 770,000.

EchoStar paid for its customer gains in higher marketing
costs, the company said last week in its quarterly earnings report. Its operating loss
widened from $16 million for the three months ended June 30, 1998, to $51 million for the
same period this year.

Wall Street analysts said that although EchoStar's
per-subscriber acquisition costs have risen to $365, they're still substantially
below DirecTV's acquisition costs.

Dish Network reported $152 million in total marketing
expenses for the quarter, more than double the $67.5 million it paid a year earlier. Of
those costs, nearly $143 million was spent on subscriber-promotion subsidies.

Meanwhile, EchoStar continues to run aggressive promotions
aimed at stealing customers away from cable and satellite competitors. In some cases, the
company completely subsidizes the cost of the equipment and installation.

In contrast, DirecTV has concentrated its promotional
efforts on the strength of its channel lineup, offering free pay-per-view movies or
programming discounts during different campaigns.

Its current promotion offers three free months of
"Total Choice Platinum" -- normally $80.99 per month -- to new subscribers who
order the "NFL Sunday Ticket" out-of-market National Football League package.

As acquisition costs go up, DirecTV and EchoStar appear to
be steering their customers toward pricier programming packages.

In recent months, EchoStar has teamed up with its
"America's Top 100" programmers to create sweepstakes to encourage current
"America's Top 40" customers to upgrade and to reward existing Top 100
customers for staying loyal.

Last month, Dish and BBC America gave away a trip for two
to London. And this month, ESPN Classic is offering Dish customers a chance to win a trip
to the ESPN Club at Disney World.

As for the future, incremental programming revenues will
continue to be a top goal of DBS firms as they introduce services from new orbital
locations. The companies hope to convince their subscribers to buy equipment that can
access new programming, including Spanish-language packages, local-to-local channels and
high-definition television.

EchoStar plans to launch its EchoStar V satellite from Cape
Canaveral, Fla., to the 110 degrees west longitude orbital location Sept. 10.

And DirecTV hopes to launch its DBS 1-R replacement
satellite to 101 degrees west sometime next month, after which it will relocate its DBS-1
bird to 110 degrees. The company already has a satellite in orbit at 119 degrees that it
currently uses to broadcast HDTV, and it plans to deliver local channels from that bird.

Much-anticipated local-into-local service is not likely to
make a big impact on DBS sales this year, according to Tellus Ventures Associates
president Steve Blum, because if top retailers aren't geared up by Labor Day,
it's too late for a major promotional push.

If Congress can pass legislation this fall, DirecTV and
EchoStar will be able to go to the Consumer Electronics Show in January with a coherent
marketing program for local-into-local service, Blum added.

Despite what some see as pent-up demand for
satellite-delivered local channels, Blum said, "The [retail] sales guys are going to
have to explain it -- especially if it entails 24-inch dishes and multiple LNBs
[low-noise-block downcoverters]."

He believes DBS can claim 25 million to 30 million U.S.
households within the next eight to 10 years. And Bear Stearns & Co. analyst Vijay
Jayant predicted that DBS could penetrate 20 million homes by 2003.

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