The Question In The Sky: Can DBS Fly?

What looked like one of cable’s biggest threats, the delivery of tv signals direct to satellite dishes in U.S. homes, is proving to be a dud.

With most Americans already overwhelmed by programming choices on cable, promoters of direct-broadcast-satellite services mainly are targeting areas too expensive for cable to reach.

And now after years of blue-sky promises by a number of DBS entrepreneurs, the only operation now signing up subscribers – Primestar – is owned by nine of the largest cable operators in the country.

“We’re not going after cable subscribers,” concurs Ted Livingston, senior v.p. of Continental Cablevision, the fourth-largest cable MSO and one of the Primestar owners. “We regard this new service as an opportunity to deliver video programming to areas not currently reached by cable.” The service consists of seven superstations and three pay-per-view channels.

But while Primestar is up and running, the most elaborate of the planned DBS services, Sky Cable, is, for all intents and purposes, dead. Its partners – Rupert Murdoch’s News Corp., NBC, Cablevision Systems and Hughes Communications – announced it with great fanfare on Feb. 21, 1990, as a potential $1 billion investment. But Sky Cable “is now in limbo: It’s not going to happen,” says a source who requested anonymity.

The only other DBS service in the market, privately funded Skypix, has yet to set a launch. It plans to transmit 80 channels of programming, 60 of them dedicated to p-p-v theatrical pics and 16 set aside as an optional package of 10 superstations and six basic-cable nets. (Four others would be service channels.)

The 16 optional channels would cost the subscriber a monthly package fee of $12.95, but Skypix has yet to announce any cable network deals.

Skypix may have trouble signing more desirable basic-cable nets because cable operators usually insist on exclusive deals. As John Bringenberg, manager of strategic planning for the largest cable operator, TCI, puts it, “We’ve invested lots of money in basic-cable services and we shouldn’t be mandated by government to sell them to third parties,” particularly DBS delivery systems that try to lure subscribers from cable.

A total of 17 movie companies have agreed to make their pictures available to Skypix, including Disney, Paramount, Universal, Columbia/Tri-Star, Orion and MGM/UA, at least in part because they like the flexibility of 60 channels. Such ease of scheduling would make big-grossing new movies available every 30 minutes in a 24-hour period.

This would take advantage of viewer impulse buying, which many of the major studios say is the key to p-p-v success, but which tends to be squelched by the rigid scheduling formats of such existing p-p-v networks as Request and Viewer’s Choice.

Partly for that reason, Harry Bernstein, head of programming for Skypix, says, “We’re not trying to take on cable. Since pay-per-view movies are the heart of the service and where we’re going to make our money, Skypix will be more analogous to a videostore than to a cable system.”

Skypix’ game plan is to transmit 80 channels to subscribers who’ve bought the hardware (compact satellite-receive antennas and decoders that will cost $699 retail) this summer. By the end of the first year, Skypix hopes to have 750,000 subscribers on board, according to Bernstein.

Meanwhile, Primestar is off to a tentative start in 38 U.S. communities, each tied to a cable system operated by one of the nine MSOs that own the service.

Dave Born, director of new business development at United Artists Entertainment’s western division, says UA has begun “a quiet launch” in Colorado communities of Aspen and Greeley, with “no promotional support and little word of mouth.” Only 14 homes have subscribed so far, but “we’re going slow by design so we can experiment with things like pricing, billing and customer service,” he says. Most MSOs didn’t begin signing subscribers until November 1990.

Because Primestar offers only 10 channels, it “will never be a serious threat to cable,” Born continues. And cable subscribers with access to a couple dozen basic-cable channels are not likely to bail out of cable in favor of something as limited as Primestar, particularly since satellite dish installation will run as high as $600. (There also is a monthly fee between $20 and $35, and a charge for p-p-v pics.)

Jim Heyworth, president and CEO of Viewer’s Choice, which is supplying two of the three p-p-v channels to Primestar (Request TV, the other dominant p-p-v distributor, is programming the third), says, “Even though our focus is cable, we look on Primestar as a [potentially] important retailer.”

“Our deal with Primestar is the same kind of a deal we’d do with a cable system,” says Lloyd Werner, president of Request TV. Primestar, he says, agrees to accept the uniform schedule that Request puts together for all of its outlets. Then Primestar negotiates directly with the movie companies for the films.

Request’s compensation comes from the fees it charges the studios for serving as the transmission belt to the retailer.

Primestar didn’t have to get the permission of the seven superstations it’s retransmitting. But by law it pays a Copyright Royalty Tribunal 12¢ a month per subscriber.

The nine MSOs that own Primestar are: AT&C, Comcast, Continental, Cox, Newhouse, TCI, UA, Viacom and Warner Cable. The tenth owner is the satellite company GE Americom.

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