CE dealers say they have little choice but to take a wait-and-see approach to the proposed merger of Hughes Electronics and EchoStar, given the dearth of details surrounding the deal.
And while some foresee a long-term upside to a combined satellite entity in terms of accelerated HDTV sales and a better offering to counter cable, they say it’ll be business as usual this holiday season when it comes to marketing their respective platforms.
CE retail titans Best Buy and Circuit City, like many throughout the industry, found themselves scratching their heads in the days following last week’s merger announcement. “We really don’t know much at this point,” conceded Joy Harris, a spokeswoman for Best Buy. “We have a contract with DirecTV, and EchoStar told us they will honor it. But it will take some time to work out all the details and it’s too early to know exactly how it will play out.”
In the meantime, she said, Best Buy plans to continue selling DirecTV systems through the fourth quarter unabated. “We don’t anticipate much change in our customer offering this holiday season,” she said.
The story was similar at Circuit City, which is awaiting more specifics on the transaction. “It’s still fairly early on in the process; there’s a long row to hoe for the merger to be complete,” said spokesman Bill Cimino. In the short term, the company will make “no change in our merchandising plans at this time,” he noted, although Circuit City sees some “very strong plusses” for a combined platform down the pike.
“It’s a positive from the consumer’s point of view,” Cimino said. “We feel that when you combine DirecTV’s strong sports programming with DISH’s strong local channel offerings, you’ll have a very compelling offering to consumers.”
RadioShack, which is a key retail conduit for DirecTV, remained mum on the merger and supportive of its sole A/V resource Thomson, which stands to lose much from an EchoStar buyout. “It’s still a proposal and we don’t want to comment on speculation,” said company spokeswoman Kay Jackson. But regardless of the outcome, she said, “RCA is still a very valuable partner for us, as we sell a full compliment of their TV, home audio and related products.”
In the meantime, RadioShack plans to continue selling DirecTV aggressively, she said, and is currently highlighting the system as part of a month-long home entertainment promotion.
Likewise, Tweeter Home Entertainment Group has no plans to change its DirecTV selling stance. “We’re definitely going to sell DirecTV during the holiday season,” said merchandising VP Bernie Sapienza. “Nothing is changing on our end as of right now.” And right now is all that the company is focused on. “It’s still really, really early,” he added. “We’re just watching it all unfold like the rest of the industry.”
Fellow PRO Group member Ultimate Electronics is also in a quandary over the quagmire-like deal, although it believes a standardized platform could be a plus for consumers and a boon to retailers. “There are a ton more questions than answers,” said president/chief operating officer Dave Workman. “The only speculation that can be done is an exercise in futility until it passes muster with the regulatory agencies — after which there’ll be endless questions about the details.”
For the interim, Workman believes it critical to “communicate to consumers that one way or another, they’ll be okay and won’t be hung out to dry. I mean, free upgrades, that’s not a bad deal.” Likewise, both satellite camps need to communicate a calming message right away in order to “not kill the business,” he said.
Long term, Workman, who has experience selling both platforms, is bullish on the benefits of a merger. “If they put someone smart in charge, and Charlie [Ergen, EchoStar CEO,] takes the best from both organizations, it will be a win for consumers,” he said. “Each company has unique strengths, and combining them will bring advanced services and more HDTV channels on an advanced schedule,” presumably spurring sales of subscriptions and HDTVs.
Moreover, a combined entity will present a compelling alternative to cable systems, argued Workman, which “are not a friend of retail.” Whether or not a mega satellite TV system might similarly decide to bypass the retail channel someday is too premature to speculate on, he said, although he doubts that they’d “kill the goose that laid the golden egg.”
But installer Buddy Davis of Davis Antenna in Washington, D.C., is leery of the deal, and believes the only one to benefit from the buyout will be Ergen. “It’s not good for the industry or the consumer,” he argued, citing its monopolistic nature. “Now, retailers and installers can pit one base after the other. True, they feverishly compete against cable for subscribers, but they also compete among themselves, which provides for a measure of checks and balances. But if this deal goes through, we’ll be slaves to Charlie.”
Davis, a former chairman of the Satellite Broadcasting Communications Association (SBCA), believes the debate is moot, however, because approval from Washington watchdogs is doubtful. “DBS was licensed to create competition. Why,” he wondered, “would they now allow less choice?”
Bob Lawrence, executive director of the AVB/Brand Source buying group, agreed. “Regulatory approval will be a major hurdle,” he predicted, and consolidation may be a hard pill to swallow. “While philosophically we prefer to deal with as few suppliers as possible, the reality is that a little competition never hurt anybody. I don’t know what the impact will be having one single supplier in a category like satellite, which is a category we really like and really enjoy. So it remains to be seen.”
Nevertheless, Bill Trawick, executive director of the NATM buying group, thinks a green light from the government is a real possibility. “DISH feels comfortable that they can pull this off and get it approved,” he observed. But pending that, and more details on the merger plan, his member dealers plan to continue supporting their respective satellite systems this holiday season.
“For the balance of this year it’ll be business as usual,” Trawick said. “A lot of our people have placed orders for hardware, and we have a long time ahead of us before we know what the impact will be.”