|
November 20, 2000
ANDREA FIGLER
Digital broadcast satellite providers will continue to lure a significant amount of customers away from cable companies this year and next, despite digital service offerings from cable, several industry sources say.
"DBS has represented, and will represent, a serious threat to cable subscribers," says Mickey Alpert, president of communications consulting company Alpert & Associates. "It seems DBS has always been one step ahead of cable in offering new services."
Analysts say the strong third-quarter growth in subscribers for EchoStar Communications, one of the two leading DBS providers, was a sign DBS companies will continue to chip away at their competitors.
EchoStar last week reported a 21% increase in subscribers for the third quarter compared with the same period last year, boosting its total customers to more than 5 million.
The company, along with its competitor DirecTV, has experienced unprecedented customer growth for the past two years. Alpert believes that will continue.
"I think DBS is going to surprise people in the fourth quarter . . . and next year," he says.
Other industry analysts say the phenomenal DBS growth rate might have hit its peak.
Francis L'Esperance, managing director for media-focused investment bank Veronis Suhler & Associates, expects DBS growth rates to drop from 19.8% this year to 14% next year and 6.6% in 2003.
Also, cable companies are tightening their grip on customers by offering digital tiers on top of their analog services.
If cable clients embrace the new digital services, customer growth for digital cable could hit 40% next year if industry expectations prove correct, L'Esperance says.
Nine out of 10 cable companies surveyed have started to provide digital cable this year, says Jimmy Schaeffler, a television and broadband subscription analyst for the Carmel Group.
"We've always said in the past that cable doesn't get it as an industry," Schaeffler says. "But, for the top players now, that's starting to change. Cox, Charter Communications and Comcast now get it."
Wall Street also appears to question whether DBS will be able to snatch more customers from cable companies. EchoStar shares fell 14.8% to close at 36.125 Nov. 14 after the company announced an increased operating loss of $89 million for the third quarter. The company attributed the loss to higher customer acquisition costs.
DBS continues to set the bar higher, making it more difficult for cable companies to win customers, Schaeffler says.
"In this industry, if you're not moving ahead, you're two steps back," he says.
EchoStar Communications, parent company of the DISH Network satellite TV service, plans to take on Gemstar-TV Guide's claims about interactive program guide patents.
In a Securities and Exchange Commission filing, EchoStar said it does not believe its own interactive program guide violates any patent, as Gemstar has charged in an infringement lawsuit.
EchoStar also stated it is unclear how the suit would affect its business:
"We cannot be certain that (Gemstar) does not own the rights they claim, that our products do not infringe on these rights, that we would be able to obtain licenses from (Gemstar) on commercially reasonable terms or, if we were unable to obtain such licenses, that we would be able to redesign our products to avoid infringement."
EchoStar also said in the same filing it is no longer in the running to buy Hughes Electronics' DirecTV satellite service.
Back to this issue
|
