The U.S. direct-to-home satellite market passed the 10
million-subscriber milestone at the end of October, the industry said.
The news was accompanied by reports of strong
net-subscriber gains by DirecTv Inc., EchoStar Communications Corp. and even PrimeStar
Inc. -- a small-dish-industry gain of nearly 250,000 subscribers for the month.
Other industry players reported milestones of their own
last week. Most notably, U.S. Satellite Broadcasting, which shares a hardware platform
with DirecTv, boasted last Thursday that it had signed its 2 millionth
A day earlier, EchoStar's share price reached a
52-week high of $34, after the company reported better-than-expected third-quarter
The swamp of positive news may have helped to convince
investors that the direct-broadcast satellite industry is in it for the long haul.
"There's no question that there's still
growth left in DBS," Merrill Lynch & Co. analyst Tom Watts said, predicting that
subscriber counts could reach 17 million before the industry sees a slowdown.
Added Chuck Hewitt, president of the Satellite Broadcasting
and Communications Association, many analysts made predictions a year ago that industry
sales would be flat this year, "and yet, we continue to have record months."
At the end of October, DirecTv had a total of 4.165 million
subscribers. Its monthly net of 107,000 was down compared with its September figure of
121,000, but up versus last October's net of 101,000.
EchoStar's subscriber count totaled 1.709 million at
the end of last month, during which it added 100,000 new Dish Network customers. This
marks a 33 percent increase over last October, when it acquired 75,000 subscribers, and it
was also up versus the 81,000 customers that the company signed this September.
October also brought relatively good news for PrimeStar,
which added 40,707 net subscribers, bringing its total to 2.207 million. In September,
PrimeStar netted only 10,002 new customers.
The C-band satellite industry's subscriber base is
hovering at just under 2 million, and it continues to lose a small percentage of its
customers each month.
DBS numbers are expected to go even higher over the next
two months, as consumer-electronics retailers dress up their stores for the holidays and
turn up the heat on their advertising to draw floor traffic.
RadioShack, for example, plans an aggressive television-ad
campaign starting right before Thanksgiving, according to its senior vice president of
merchandising, Rick Borinstein. RadioShack will promote satellite systems as great family
gifts in the ads, along with other RadioShack favorites, such as personal computers,
digital phones and remote-controlled cars.
Both RadioShack and Sears, Roebuck & Co. have seen
tight supplies on DBS product over the past year.
"We've been chasing product all year long,"
Borinstein said. "This shows that it's a healthy industry."
In addition to the usual holiday crowds, larger retail
chains are expected to benefit from the focus that high-definition television may bring.
Stanley E. Hubbard, president and CEO of USSB, believes
that while many people may not be able to afford HDTV right away, having a DirecTv/USSB
system on the same sales floor might help them to take notice of the digital-quality
picture and sound that DBS offers.
EchoStar faces a substantial disadvantage over DirecTv in
November and December, EchoStar treasurer Rick Westerman said, because it lacks its
rival's level of consumer-electronics distribution: EchoStar's mostly
smaller-store base doesn't command the same level of holiday traffic that the larger
"The advent of HDTV will drive people into the
[consumer-electronics] stores, so we want to be there," Westerman added.
EchoStar does have advantages over DirecTv in other areas,
however. The company reported that its subscriber-acquisition cost for the third quarter
was only $240 per gross addition -- significantly lower than the figure that DirecTv
Westerman said he expects EchoStar's acquisition cost
to surpass $300 during the fourth quarter to help cover the cost of the company's
"OneRate" promotion, which offers free hardware systems to certain new
Wall Street analysts were pleased that EchoStar reported
positive cash flow for the third quarter: It reported $325 million in revenue and $74
million in premarketing cash flow. Earnings before interest, taxes, depreciation and
amortization (EBITDA) for the quarter were $9 million.
"DBS had a good quarter," Bear Stearns & Co.
analyst Vijay Jayant said, "and EchoStar was the star."