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Despite the apparent failure of their planned merger, the nation's two direct broadcast satellite operators should continue to use HDTV as a critical tool in drawing new subscribers from their cable competitors.
Though slowed by their merger setback, DirecTV and EchoStar both say they will continue to push the envelope on delivery of new digital services, even as their cable competition announces multichannel HDTV services in many markets.
The activity should get CE retailers excited about sales of millions of new cable and satellite set-top boxes and HDTV services.
Looking back, the consumer electronics industry can take credit for advancing the cause of HDTV via satellite. An HDTV rollout timetable was mandated by the FCC for U.S. terrestrial broadcasters and aggressively supported by the CE industry in the 1990s. For the DBS industry, however, the decision to offer HDTV came largely in response to requests from their CE manufacturing partners and retailers who need a means of getting some HDTV content into every market in the country.
Obviously, the hope included the idea that HDTV might draw new customers, but more critically, DBS operators wanted to ensure they would keep existing upscale subscribers loyal to satellite. Thus today, DirecTV offers three full-time HDTV channels while EchoStar has five.
EchoStar offers subscribers nationwide a set of four HDTV channels, representing a big chunk of the satellite provider's more than one hundred FCC-assigned DBS Ku-band channels. The four include HBO and Showtime, the two premium service providers, as well as a Pay-Per-View (PPV) movie service and the Discovery Theatre. Additionally, in 17 larger urban/suburban markets, EchoStar offers its DBS subscribers the CBS Television Network. As such, EchoStar claims it is the "No. 1 HDTV provider to the entire nation."
Talks are presently underway to add additional HDTV content, perhaps in the form of more sports and/or a service such as Mark Cuban's HDNet.
EchoStar also said it will launch a new HDTV set-top box (STB) at International CES in Las Vegas in early January. This new STB will be a combination HDTV and Digital Video Recorder, offering an exceptionally large hard drive on which consumers may store significant HDTV content for later viewing, pausing and program-skipping.
Retail costs for the existing EchoStar STB, called the model 6000, are running at $499. If over-the-air digital terrestrial broadcast signals are available in an area, the consumer there may instead purchase a $149 digital tuner, allowing the consumer to receive the off-air signal.
For the hardware set including the model 6000, two satellite dishes, and the other hardware required for satellite-delivered HDTV, EchoStar offers a package today at $699.
On the content side, if the consumer purchases either Showtime or HBO packages, the extra HDTV signal and service is free and automatic. For a package price of $7.99/month, viewers can also receive an HDTV package that includes Discovery Theatre and the CBS HDTV service.
"Customers in general have been behaving positively toward HDTV, and we are responding by offering new spectrum and equipment," an EchoStar spokesman said.
DirecTV's three HDTV channels include HBO, Showtime and Cuban's HDNet. HDNet typically airs various sports, such as Major League Baseball and the National Hockey League, news, documentaries and specials. DirecTV owner GM Hughes currently allocates transponder capacity for its three HDTV channels at the 119-degree orbital slot.
Like EchoStar, subscribers to HBO and/or Showtime premium services automatically receive DirecTV HDTV signals.
DirecTV HD set-tops are produced by a number of manufacturers, including another GMH subsidiary, Hughes Network Systems (HNS), plus Samsung, Sony, Thomson, Toshiba and Zenith.
HDTV has been on the table as a key benefit of EchoStar's purchase of DirecTV since the earliest announcement of the proposed merger back on Oct. 28, 2001. All along, EchoStar and DirecTV have said that if combined, the New EchoStar would automatically go to a minimum of 12 HDTV channels, to maximize spectrum efficiencies and usage.
With the demise of the merger proposition, plans for additional HDTV services, which would differentiate DirecTV and EchoStar from U.S. cable competitors, have been scaled back.
EchoStar, without the merger, is not announcing plans for any new channels. DirecTV goes only so far as to suggest possible new channels with the successful launch of its new satellite late in 2003. Future allocations of HDTV bandwidth also turn on both the quality of future content and the competing demand for bandwidth for other services, such as local network carriage in the top urban and suburban markets.
A DirecTV spokesperson would only note that the Discovery HDTV offerings fall clearly within this "quality" content definition.
Although progress may appear to have slowed, HDTV via satellite will be an important stimulus to the growth of the CE industry. Retailers can look forward to not only the sale of new and better-margined STBs, but also all of the supporting hardware for digital home theater systems.
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.