"Local into Local" Boosts Satellite Broadcasters

When the retransmission of local TV signals by direct satellite broadcasters became legal, analysts and industry insiders expected an increase in business. They did not expect the surge in new subscribers that came in the wake of the decision. EchoStar, the perpetual runner-up to dominant DBSer DirecTV, added 455,000 new subscribers to its DISH network in the first quarter of this year, bringing its total customer base to more than 4 million as of the end of April.

The new signups were the result of an aggressive marketing program that included free dish antennas—and the lure of viewing local broadcasts via satellite. More than half of DISH customers are now receiving local TV signals, according to EchoStar chairman Charlie Ergen. EchoStar serves 28 major metropolitan broadcasting markets, and competitor DirecTV added 405,000 new customers during the first quarter. The gain, although significant, was smaller both numerically and proportionately because DirecTV has 8.3 million subscribers, half of whom are also getting local signals.

"We knew first-quarter DBS growth would be strong, but this is better than we thought," analyst William Kidd told the Wall Street Journal. DirecTV spent about $500 to land each new customer.

EchoStar's first-quarter revenue jumped to $566 million, compared to $310 million for the same period in 1999. Operating losses for the quarter totaled $142 million, compared to $56 million reported during the first three months of 1999. The increased loss was primarily due to the costs of acquiring the new subscribers, estimated at $467 per viewer, according to company executives.

The average DirecTV subscriber spends $58 per month compared to the typical DISH customer's $46. Both DBSers are looking for growth by offering new services, such as hard-disk video recorders that allow viewers to pause during real-time programming, and interactive music services like DirecTV's "Wink," which will let viewers purchase music and see sports statistics onscreen during games. High-speed Internet connections are on the way from both companies within the coming year, and both are intent on expanding their services beyond North America.