PrimeStar Inc. executives last Wednesday reported the
company had signed up 70,000 gross subscribers in May. That's the good news. The bad
news is it netted only 5,000 new customers, after seeing 65,000 disconnects for the month.
The low subscriber count goes counter to the industrywide
trend. DirecTv Inc. posted 70,000 new subscribers in May, and EchoStar Communications
Corp. added 57,000 customers last month, both up over year-earlier figures. Last May,
DirecTv signed 50,000 subscribers, and EchoStar added 32,000.
Richard Borinstein, senior vice president of merchandising
for RadioShack, said the retailer continues to see strong performance on both the DBS
platforms it markets, PrimeStar and the Digital Satellite System, which is backed by
DirecTv and U.S. Satellite Broadcasting.
"The DBS companies are performing at or above our
expectations," Borinstein said, "and our expectations are extremely
PrimeStar tried to put a positive spin on its May numbers
during a conference call with reporters last week, held to announce to appointment of
chairman and CEO Carl Vogel.
"We're heartened that there is still volume
demand for our product," said PrimeStar president and chief operating office Dan
O'Brien, who vowed to take steps to reduce customer churn.
But analysts were not immediately reassured.
"There's nothing to suggest to me there will be
an automatic reduction in churn," said Bob Berzins, senior vice president at Lehman
Brothers Inc. "The value proposition for PrimeStar doesn't make sense any more
with the low cost of DirecTv and EchoStar hardware."
Mickey Alpert, president of Washington, D.C.-based Alpert
& Associates, surmised that many ex-PrimeStar customers had defected for DirecTv or
EchoStar. He predicted that the situation would change dramatically if PrimeStar were able
to market a high-power product.
Not all PrimeStar subscribers are leaving for the
competition, however. According to Steve Blum, president of California-based Tellus
Venture Associates, "Some of them are just going fishing." He said some DBS
subscribers churn out as the weather gets nicer. "People just don't watch as
much TV during the summer," he said.
Even given PrimeStar's low subscriber-acquisition
numbers, the direct-broadcast-satellite industry saw its best May to date, according to
Evie Haskell, managing director of SkyTrends, which tracks subscriber numbers.
"The rest of the industry is booming," she said.
DirecTv president Eddy Hartenstein said his company is in
the midst of "a second growth phase -- a bit of a spurt." The company previously
posted a stronger May when it signed up 80,000 subscribers for the month two years ago.
Borinstein said many consumers are taking DirecTv up on its
$99 second-set-top-box offer, which RadioShack and other retailers are currently
promoting. The campaign has been so successful, in fact, that the stand-alone receivers
are in short supply, although he's had no trouble getting enough complete systems to
The RadioShack executive said he doesn't see any
slowdown in DBS sales.