Digital-cable operators are testing a number of dish-buyback programs to see whether direct-broadcast satellite television subscribers are really as loyal as all of the initial research said they were.
Early results indicated that some dish owners can be bought for as little as $200, and perhaps even less.
"We're finding that they're really not that loyal," Insight Communications Co. Inc. senior vice president of marketing and programming Pam Euler Halling said.
In preparing for its first buyback program-which Insight plans to launch soon in Lexington, Covington and Louisville, Ky.-the MSO surveyed dish owners to see what types of offers would entice them to switch back to cable.
When one Insight direct-sales representative was told he could make offers on the spot if dish owners seemed receptive, 23 of the 25 who were pitched accepted, Euler Halling said.
AT & T Broadband started a buyback program in Denver two months ago, following a program it began several weeks earlier in Salt Lake City.
"We've generated about 1,000 win-backs in each market," AT & T Broadband acting vice president of video-product management and marketing Steve Apodaca said.
In Denver, AT & T Broadband offers $200 in digital-cable programming, plus free digital-cable installation, to DBS customers who turn in their dishes and receivers and commit to one year of digital-cable service. The $200 programming credit is spread out over four months as four vouchers worth $50 each.
"Ultimately, I don't know what we'll do with all of the dishes," Apodaca said.
To attract dish owners, AT & T Broadband uses radio and newspaper ads, as well as guerilla-marketing tactics. Installers and technicians hand out door tags promoting the offer anywhere they see dishes, and even corporate-level employees are encouraged to take the door tags around with them.
"Some researchers say consumers are not willing to come back to cable after they've gone to satellite," Apodaca said. "We hope this proves them wrong."
So far, DBS providers don't seem to be throwing in the towel in the face of digital-cable competition.
"If we had spent that much money and that much time on a project like that, we would have converted a lot more cable customers to Dish Network" than AT & T Broadband converted from DBS, EchoStar Communications Corp. spokesman Marc Lumpkin said.
DirecTV Inc. spokesman Bob Marsocci agreed. "The DBS industry has collectively taken many, many more customers from cable than they will take from us," he said, adding that AT & T Broadband's buyback program only validates the strength of DBS as a competitor to cable.
But by most indications, early dish-buyback programs are only the beginning of a trend among MSOs that are more confident of going head-to-head with DBS with more robust digital-cable packages to offer.
"We'll be deploying dish-buyback programs fairly aggressively," Comcast Cable Communications Inc. vice president of digital marketing Andy Addis said.
Comcast is testing buyback programs in a number of cities, with promotions varying by market. The MSO is testing offers including cash paybacks and programming discounts, with consumer values ranging from $50 to $300. The company takes back the receivers, but not the dishes, in its current trials.
Insight will allow customers to turn in dishes or receivers, Euler Halling said, adding that it was important to collect the hardware "because otherwise there's no commitment" on the part of the consumer.
Some operators are concerned with the legality of having their technicians remove dishes from homeowners' roofs, fearing the potential of lawsuits if the roofs are somehow damaged in the process. Insight lawyers are looking at subscriber agreements that would indemnify the MSO in exchange for taking down the dishes.
Of course, cable operators have a long history of offering to remove antennas. It was once a common practice to offer to remove unsightly rooftop aerials from new customers' homes, industry veterans recalled.
But reclaiming dishes rather than receivers does raise logistical concerns. "A sales rep typically wouldn't climb up on the roof," Euler Halling noted.
She added that the situation could get even more complicated if DBS customers lease dishes rather than own them. "If they don't own the equipment, we wouldn't be able to make the same offer," she said, but the MSO would likely make another offer to try to win back the subscriber.
Earlier this year, Adelphia Communications Corp. added a dish-buyback component to a larger digital-cable direct-mail campaign targeting former cable customers and those who had downgraded to broadcast-basic packages.
A standard pitch to former Adelphia subscribers offered free installation and two months' free digital-cable service. Satellite-dish owners were pitched bonus checks good for $100 if they traded in their dishes when they signed up for digital cable.
According to a spokesman for the MSO, some of Adelphia's technicians have found creative uses for the dishes they've retrieved, including one that was converted into a toilet and another that became a bird feeder for some local geese.
Euler Halling said the financial incentive to switch back to cable "more or less addresses customers' concerns with breaking off long-term contracts," such as the ones Dish is requiring in some of its low-price promotions.
A spokeswoman for Time Warner Cable said the MSO has no overall corporate program for dish buybacks, although it has tested a number of tactics at the division level to determine the most effective way to regain past customers.
In Houston, for example, the MSO offers $200 to buy back DBS receivers, spreading the payment out over 10 months in programming credits, according to a local system executive.
Euler Halling said Insight is still testing whether to give most of the programming credits in the first two months or to spread them out over time to encourage new win-backs from churning out again.
In customer surveys, Insight asked participants why they subscribed to DBS, whether they'd ever had cable, whether they knew Insight now offered digital cable and which of two offers was more likely to get them to switch back to cable.
An offer of $150 in programming plus free installation did twice as well on the survey as an offer of $100 in cash plus free digital-cable installation, Euler Halling said. Also, only one-half of local DBS customers knew Insight offered digital service.
Pleased with the strong response to buyback programs in Denver and Salt Lake City, AT & T is "definitely taking a look at a national rollout," Apodaca said. "Satellite customers are looking for a reason to come back, and we're giving it to them."
B.G. Marketing Inc. president Barbara Sullivan-Roehrig predicted that once cable wins DBS customers back through a buyback program, those subscribers would be unlikely to go through the hassle of switching back to DBS in the future.
"I do unequivocally think it's worth the money" to try to win former customers back, she added.
With forecasts predicting that DBS could command up to 22 percent of television households within a few years, "I could see why cable operators are sensitive to that and want to turn that around," CaritaSoft Inc. director of product marketing Doug Kern said. "This type of buyback program is one of a number of nontraditional offers in the market as a result of increased competition."
But Kern suggested that cable operators would do well to proactively target customers who are likely to leave for DBS before they churn, through customer-relationship-management programs and retention campaigns.
CaritaSoft can help to combine cable operators' internal subscriber data with external marketing databases so MSOs can model the characteristics of formers who left for DBS with current customers who are likely to do so.
"It's very important to retain customers and reduce churn," Kern said, "and to do that, you've got to do target marketing."