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AT&T CruiseCast, ICO Face Financial Woes

The market for live video in the automobile is off to a rocky start, but new entrants say they will continue to pursue this nascent category.

The AT&T CruiseCast system has seen lackluster sales since its June launch, said industry members and the company admits it is seeking financing in order to continue service.

A second player, also in financial straits is a subsidiary of ICO Global Communications that planned to launch satellite car video early next year. It filed a Chapter 11 petition in May. An ICO spokesman said the company is hoping its reorganization plan will be approved in the next two weeks.

But Audiovox said its car video FLO TV tuner for the car at $699 (including installation) is receiving heavy dealer interest as it ramps up for a November launch. And a second live, streaming TV service called Mobile DTV (see p. 4) is expected to result in new car tuners late in 2010 or 2011.

Audiovox Electronics said of its upcoming FLO TV launch, “Would it be ideal if the economy was stronger, yes,” according to president Tom Malone. “Also this isn’t our only business so we can let things grow over time. We think the adoption rate will be fairly high…I can tell you the level and anticipation is higher than any program I’ve seen in years,” Malone claimed.

The market may also be impacted by smartphones and video portables.

ICO said it has been observing how consumers are using video on cellphones in the car, “We’re watching the handsets, the take rates on video. Those are people watching on a 2-inch screen…We still think there’s potential for that market, but what model consumers are going to adopt, we don’t have a crystal ball,” said a spokesman.

Audiovox told Wall Street analysts this month it will offer its own portable FLO TV product as well. (This would join a $249 FLO TV portable from HTC due this season. Until now FLO TV was only offered on select mobile phones.)

But suppliers argued that portables will not steal the whole show. “Generally, we think people like to snack on mobile devices — they are great for getting a quick sports clip or a video a few minutes in length,” said the ICO spokesman. Longer trips might require larger screens and more reliable service without cellular blackouts, he claimed, adding. “Generally speaking, we think mobile video will be a pie that grows and there will be a lot of choices. Some will prefer handset-based and some will prefer vehicle based or another portable, because Americans love TV and love to be mobile.”

Early this month, retailers received this message when they tried to call Bill Blades, program manager at RaySat (which partnered with AT&T to create the AT&T CruiseCast system): “RaySat will no longer be supporting any more activations of AT&T CruiseCast from this point moving forward” and is “not fulfilling any equipment orders, anymore.” Later, Mike Grannan, RaySat Broadcasting COO, called the message “a miscommunication” noting, “We are working through financial difficulties, but the service is up and running today.”

Grannan would not elucidate RaySat’s financial concerns, but stated, “Given the financial difficulty, we’re looking at multiple options going forward with a goal of securing an agreement that would allow the service to continue, or if necessary, that would reimburse customers.”

He acknowledged that the company laid off an unspecified number of employees this month.

The AT&T CruiseCast car system delivers 22 channels of video and 20 channels of audio and is carried by more than 600 retailers, including Car Toys. The service carries a charge of $28 per month.

ICO Global Communications subsidiary DBSD North America, now in Chapter 11, said it is not planning at present to show its system at International CES in January. “We’re continuing alpha trials, and looking at what consumers’ preferences are,” said the spokesman.