Satellite TV Firms Grow In New Orleans

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Two years after Hurricane Katrina slammed New Orleans, the population of the Crescent City is estimated to be approaching 300,000, compared to the 2000 census count of 484,674. The metropolitan area as a whole is closing in on its pre-disaster population of 1.4 million.

In the wake of the storm, though, one business has managed to nearly double its customer count: satellite TV.

DirecTV and EchoStar Communications’ Dish Network had pulled in 28.6% of the New Orleans TV market as of July, more than twice their 12.6% penetration in 2005, according to Nielsen Co.

In turn, cable has seen its penetration decline from 76.1% to 65.6% since the hurricane struck, according to Nielsen.

Cable operators “had their infrastructure, I don’t know what word to use, devastated,” said Bruce Leichtman, president of Leichtman Research Group. “For people who were unable to get cable, not for days but for weeks and months, [satellite] was the only way to get television. So it’s not surprising that [it] would grow there. There was no alternative.”

<p> </p><p> <strong id="d9e55-22-strong">2005 Pre-Katrina</strong> </p><p> <strong id="d9e59-24-strong">% of Households</strong> </p><p> <strong id="d9e63-26-strong">July 2007</strong> </p><p> <strong id="d9e67-28-strong">% of Households</strong> </p>

Cable

511,520

76.1

372,080

65.6

DBS

84,790

12.6

161,870

28.6

Satellite now has 161,870 subscribers in the Big Easy compared to 84,790 prior to the killer storm.

Cable is currently in 372,080 New Orleans-area homes, compared to 511,520 before the wind, rain and flooding came.

The satellite companies — in some cases selling their service from tents in parking lots and installing TV service in evacuee shelters — were able to make some gains as Big Easy cable systems were working hard to repair their damaged plant, downed lines and flooded gear after the storm.

“We picked up lots of good subscribers from the cable systems where there was no response,” EchoStar executive vice president of business development Mike Kelly said. “We turned a negative into a positive and we’re very happy with the results that we achieved, and with the community and the effort that was made by our field technicians.”

Satellite’s gain of 77,080 subscribers in New Orleans is tiny, in the overall picture of nationwide competition for paying television viewers. It’s almost a rounding error for DirecTV and Dish, which have 16.3 million and 13.6 million customers all told, respectively.

But it’s sudden progress in a market that historically has not cottoned to putting satellite dishes on roofs.

BUSH WHACKING

In a show of commitment, EchoStar chairman Charlie Ergen visited Dish’s New Orleans’ team several times after the hurricane struck, Kelly said.

Dish could promote a service that is relatively unaffected by disaster on the ground. According to Dish Network, in contrast to cable, less than 5% of its subscribers in the Katrina-affected area suffered any service interruption.

And there is no let up in the competition for New Orleans’ besieged customers. To add insult to past injury, Dish this month kicked off an ad campaign promoting the start of the National Football League season. That multimedia campaign features New Orleans Saints’ running back Reggie Bush, who is described as a Dish Network fan.

The competition for customers is likely to heat up again over the next few months.

Two-year contracts that Big Easy residents signed for satellite TV after Katrina hit are expiring, and Cox Communications New Orleans and Charter Communications — the Big Easy’s main cable providers — believe there is an opportunity to bring those TV viewers back into cable’s camp.

“A lot of people who had purchased satellite, as their two-year contracts are ending up, they’re giving us a call,” said Brad Grundmeyer, manager of public and government affairs for Cox New Orleans.

Charter is sending salespeople to homes to woo back satellite customers, with offers of free installs and a triple-play promotion, now that it has launched phone service in several area parishes.

“What we’ve done and found very successful is sending our own door-to-door people into some of the most devastated areas, especially those we’ve lost or had lower penetration in,” said Lisa Brown, Charter’s Louisiana director of sales and marketing. “We are out there door to door selling our service to the customer in hopes of getting them back over.”

FORTRESS BREACHED

Even now, satellite’s share of the New Orleans market is just a hair above the national average of 26.7% of households, according to Nielsen. And even with satellite’s gains, cable’s penetration in New Orleans is still higher than the national average of 61.4%.

Two major cable providers split the bulk of the market. Cox operates in four and Charter in seven of the 14 parishes or counties that are part of the overall New Orleans TV market, the nation’s 53rd largest.

Leichtman said that Cox’s strength as a cable operator was one of the major reasons why satellite penetration in the New Orleans market was well below the national average.

How strong?

Cox’s general manager in New Orleans was popular enough to be elected mayor, “which is almost unheard of” for a cable executive, Leichtman said. That former general manager, Ray Nagin, wound up leading the city during its time of crisis.

Charter officials credited cable’s localism, in terms of programming and community involvement, with giving it a traditional edge over satellite in New Orleans.

“The Southern states, they like localism,” Brown said. “They want to see local news, local sports — high school, college — and that’s what we reflect.”

That said, Southerners who do have satellite service appear to be very happy with it. DirecTV and Dish Network recently scored high customer-satisfaction marks in the South. A J.D. Power and Associates survey released earlier this month ranked DirecTV No. 1, and Dish No. 2, in a region that included Louisiana and 13 other Southern states. Bright House Networks was third in customer satisfaction and Cox was fourth, while Charter ranked ninth out of 10 video providers.

DirecTV and Dish Network last week declined to disclose their current subscriber counts in New Orleans.

DirecTV did say that it has seen a more than 50% increase in its customer base in New Orleans.

That’s because when Katrina came a-calling two years ago, they both sprang into action.

The satellite providers deployed additional technicians, from around the country, as did cable operators for their systems, to the hurricane-ravaged area.

DirecTV sent in about 100 technicians, according to Brad Bentley, vice president of acquisition marketing and direct sales.

Similarly, Dish mobilized several hundred technicians, who volunteered to go and live in a “tent city” the satellite provider set up in Lake Charles, La. Dish trucked in 300-by-100-foot tents from the company’s Denver headquarters to house them.

The satellite provider helped restore service to its subscribers, get retailers back on their feet and install service for new subscribers, Kelly said.

“We were just installing new customers on an a la carte basis,” he said. “We literally had signage on the trucks saying, 'We’ll follow you home and get you installed with television service.’”

Dish Network also set up tables and tents outside retail stores, such as Wal-Mart, to sell subscriptions after Katrina, according to Kelly.

DirecTV launched a “Recovery, Rebuild, Reconnect” ad campaign to drum up customers in New Orleans.

But, more recently, DirecTV and Dish Network officials said they have not done any special marketing to specifically target New Orleans.

DOWNPLAYING NIELSEN

Cox and Charter officials acknowledged that they’ve lost some customers to satellite. But they downplayed Nielsen’s numbers.

Cox did not suffer “a massive loss” of customers, according to Cox New Orleans vice president and region manager Greg Bicket, because of the system’s promptness in getting service restored.

Cox New Orleans is down 70,000 customers. It now has 186,000 basic subscribers, down 27% from 257,000 pre-Katrina.

But that doesn’t mean satellite has gained a lot of ground, he maintains.

Bicket put satellite penetration in Cox’s service area, which includes the center city, at below 5% before Katrina.

“Even if you double [that], you’re still below 10%,” he said. “We think we’ve kept it in single digits, and that’s what some of the reports we get suggest.”

So how has satellite gotten to nearly 29% penetration in the total market?

“What that translates to is other operators in the [area] who were slower to rebuild and slower to get their networks back on suffered because of some of this impatience in the marketplace,” Bicket said.

Charter officials said it’s “difficult” to say what their DBS penetration is now, compared to the 28.6% for the entire market. They also declined to say how many New Orleans-area subscribers they have now, compared with pre-Katrina.

“We had some initial losses, and we’ve done a good job of stopping the bleeding and taking efforts to improve the situation over time,” said Mark Adams, director of marketing for Charter’s East Division.

“I think the overall impact on the market is less in our area,” he said. “Certainly, a lot of people in that area are in unusual housing situations, etc., and I’m sure there’s been some increase in the [direct-broadcast satellite] penetration, but overall, the business is doing very well there.”

Adams and Brown said that some displaced residents who were living in Federal Emergency Management Agency trailers, which are moveable, opted to get satellite because of the portability it afforded with its dishes.

And they argued that for contractors who came to New Orleans to work in the recovery effort, moving from location to location, satellite was also a convenient way to get TV service.

“There are a lot of people in that [Designated Market Area] who were not in that [area] before, so I would not necessarily assume that growth in [satellite] penetration is directly tied to a loss in our subscribers,” Adams said.

Those newcomers “may have not been customer of ours before this whole storm took place,” he said.

SPEAKING SPANISH

There’s another factor at play. New Orleans has seen an influx of Hispanics into the city, as part of the workforce for the city’s reconstruction. And DirecTV and Dish have robust Spanish-language packages.

“Satellite is seen by many of our Hispanic newcomers as the way to go for Spanish-speaking families,” Bicket said.

But Cox is “staying in tune with that growing marketplace,” and courting it, with some of the additions it has made to its Spanish-language tier, “Paquete Latino,” Bicket said.

Orleans Parish since Katrina has lost 93,360 TV homes, dropping to 80,790, as residents relocated to nearby parishes or out of state.

“The change in the overall makeup of the market would favor [satellite],” Adams said. “Most of that loss [of TV homes] — just of customers out of the [market] now — would come from cable because we had most of the market to begin with.”

Cox and Charter are touting their triple-play bundles as a real lure for customers in post-Katrina New Orleans. Bicket said Cox’s “take rate” for the triple-play is up by nearly 50%, while Charter officials said their launch of phone service in several parishes in the New Orleans TV market is helping the cable company recover subscribers.

“The launch of telephone had definitely enabled us to get some of our customers back,” Brown said.

Since Katrina, Charter has rolled out phone service in Terrebonne, Tangipahoa and LaFourche parishes, and will launch it in St. Tammany parish, the biggest parish Charter serves in the market, in mid-September.

Charter has extended three-month, six-month and 12-month offers to subscribers, including a $99.97 triple-play under the year-long plan, Brown said. The operator is offering free installation to those who come back to Charter.

After Katrina, the satellite TV providers signed up customers for one-year and two-year contracts, she said. Charter used a door-to-door sales force to try to target switchouts whose one-year deals expired a year ago, and it is making the same effort now as the two-year contracts expire.

Charter is still in the process of building an in-house direct-sales force, and is also using a contractor, to go door to door.

“They look for dishes on the roof and have a data sheet with active and disconnected customers’ addresses,” Brown said.

Charter is sending direct-sales reps out in the field, but the company has had trouble recruiting those salespeople, because the population is still not back to its old levels.

DirecTV said it has retention offers in place for anyone who threatens to return to cable.

Charter and Cox are looking to bring back customers who switched to satellite during a period when DirecTV and Dish Network are running big promotions touting their sports programming.

DirecTV, for example, is kicking off its exclusive “NFL Sunday Ticket” for the coming football season. The offering has new features this year, with those who subscribe to the SuperFan option having access to more than 180 games in HD and the ability to stream live games to their PCs or laptops.

Dish Network’s new TV ads talk about the service offering “football 24/7,” which is merely a reference to the fact that it is carrying NFL Network, which Cox and DirecTV also offer.

“It’s really just to muddy the waters and confuse the issue a bit of who is the leader of football programming, because basically, it’s talking about the NFL Network,” Leichtman said of Dish Network’s ad, saying that the satellite provider is “really trying to not cede the football market to DirecTV.”

Or cede any of its storm-born subscriber gains back to cable.

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