Santa Smiles on DBS


The robust sales pace for direct-broadcast satellitesystems continued through November, and early indications pointed to a happy holidayseason for the industry.

Together, the DBS players added 263,000 new subscribers totheir rosters last month, up over both the previous month and November 1997. And thecompanies expected to add even more customers this month, as consumers head out toshopping centers in droves.

Market leader DirecTV Inc. held its lead in November. With110,000 new subscribers, DirecTV ended the month with 4.275 million customers. But thecompany's new-subscriber count was down compared with last November, when it posted120,000 acquisitions.

Eddy Hartenstein, president of DirecTV, said unseasonablywarm weather in some parts of the country contributed to lower sales atconsumer-electronics stores, DirecTV's primary distribution chain.

In addition, the postponement of theprofessional-basketball season hurt DirecTV, which offers a seasonal National BasketballAssociation sports package. While it's not as strongly associated with DirecTV as theNational Football League's out-of-market games are, Hartenstein said, the NBA was anacquisition tool in itself.

EchoStar Communications Corp. signed up 101,000 net newsubscribers to its Dish Network last month, up 44 percent over last November'sfigures. The company ended the month with 1.81 million customers.

A spokesman for the company said EchoStar had so muchsuccess with its "free" hardware promotion that it would extend the offerthrough March. EchoStar is expected to announce new details for the promotion -- whichwill expand to include a second hardware model -- early next year.

Analysts believe that EchoStar's new subscriber countlast November was artificially low because the company did not have enough systems on handto meet demand.

PrimeStar Inc. saw its most successful month this year infiscal November, signing up 52,000 net new subscribers. The second-place DBS player endedNovember with 2.259 million subscribers. The company posted 40,707 new customers inOctober. In the months before that, however, its numbers were even lower, attributed toheavy churn and difficulties in transitioning from a partnership to a single corporateentity. Last November, PrimeStar Partners L.P. added 42,000 customers.

DirecTV signed on 107,000 customers in October, andEchoStar added 100,000.

"EchoStar has really improved its selling propositionand distribution," said Steve Blum, president of California-based Tellus VentureAssociates. He thinks that the company could outshine DirecTV for a month or two in termsof new-subscriber growth once the holidays are over. During the holiday selling season,Blum said, the consumer-electronics channel "is king."

DirecTV, which came to market two years ahead of DishNetwork, negotiated exclusive retail-distribution agreements with some of the biggestconsumer-electronics chains, such as Best Buy and Circuit City Stores Inc. Today, SearsRoebuck & Co. is the only major national retailer that distributes EchoStar'sproduct, and it also markets DirecTV.

Bear Stearns & Co. analyst Vijay Jayant said EchoStarmay have a great shot at gaining distribution with consumer-electronics retailers oncetheir exclusivity contracts expire, given its promise of additional channel capacity andlocal-into-local programming.

Hartenstein, however, said DirecTV is always talking withits retailers, adding, "I don't see any compelling reasons for our relationshipsto change."

Rick Borinstein, senior vice president of merchandising forRadioShack, said that while the retailer has had talks with EchoStar, it has chosen tostick with DirecTV and PrimeStar.

"DirecTV is still the unequivocal leader in theindustry," Borinstein said. RadioShack offers PrimeStar as an alternative DBS servicefor customers who prefer the "nothing-to-buy" offer, he added.

RadioShack saw strong DBS sales in November and December,according to Borinstein, who added that he expects the growth to continue in 1999.