Moguls toast growth, eye high-def challenge
NEW YORK — U.S. satcasters aren’t daunted by the cable industry’s recent digital gains. In fact, DBS execs believe that thanks to high definition, digital video recorders and the addition of local TV-station signals in more markets, there’s more than enough room for growth in their far-from-mature market.
Speaking at the 20th biannual SkyForum conference in Gotham Thursday, chief execs Charlie Ergen of EchoStar and Eddy Hartenstein of DirecTV joined satellite-mogul-in-training Chuck Dolan of Cablevision to speak about growth prospects with a grace uncharacteristic of this brutally competitive business.
A tripling of DirecTV’s subscriber base from 11 million to more than 30 million is “a realistic goal” in the next few years, predicted chairman and CEO Hartenstein.
Ergen, for his part, was unusually magnanimous about his new rival Rupert Murdoch, who is due to take over DirecTV (Ergen’s own, failed takeover target in 2002) from its current parent General Motors early next year. “There’s nobody in the world that knows more about satellite TV than News Corp.,” he said. “It’s good for our industry … the big loser will be cable.”
“I’m still a cable guy, but it’s not the only delivery system out there,” said Dolan, Cablevision patriarch and new chief exec of the high definition Voom platform. Acknowledging Wall Street’s and the media’s skeptical reaction to the company’s plans to spin off Voom together with its prized Rainbow cable networks, Dolan said the only way to overcome the negative reaction is through performance. “Cable returns are now predictable,” Dolan said. “We’ve moved into a project that is risky and for which there are still many questions … that creates consternation.”
Dolan was confident that high definition will quickly capture the imagination of potential customers, likening it to the shift from black and white TV to color. “High definition will quickly become the standard,” said Dolan, who isn’t alone in using the service as a differentiating offering.
DirecTV is not exactly quaking in its boots over the introduction of Chuck Dolan’s Rainbow DBS satellite program service, Hartenstein said, mainly because it doesn’t offer some of the major basic cable networks, such as USA and TNT. Ergen was coy on Voom’s long-term prospects but said he welcomed Rainbow’s effort, adding that it would be a net gain for the overall satellite business.
Local stations still a hurdle
And although Cablevision’s Voom is focusing most of its marketing on a batch of high-definition channels, Hartenstein said DirecTV provides its subscribers with high-def applications of such cable powerhouses as HBO, ESPN, Discovery and Showtime, as well as services such as Mark Cuban’s HD Net and HD Net Movies.
“There’s no question that HD will grow,” he said. “The only real question is how quickly it will grow.”
One technological barrier that hobbles DirecTV, EchoStar and Voom is that they don’t have the capacity to offer the HD programming being transmitted by the broadcast networks through their local TV stations.
By contrast, cable systems throughout the country are upgrading to digital so that they’ll be able to accommodate the extra bandwidth needed for local-station HD.
Asked when the takeover of DirecTV by News Corp. will get all of its regulatory approvals and become official, Hartenstein said, “I’m confident that the process will be completed by year-end.”
Dolan said his Rainbow programming team is developing 10 new channel ideas to add to its current platter of 21 exclusive high-def offerings. In particular, he said, Voom is interested in creating local and regional programming in order to exploit the 22 spot beams its satellite provides.
Bullish on spot beam
DirecTV is also keying on spot beam potential. Hartenstein said the satcaster is slated to spend $1 billion for the spot beam technology that will usher in DirecTV’s ambitious blueprint for growth.
This will allow DirecTV to transmit the local TV stations to all 210 markets by 2008, in the process adding 20 million more subscribers. Satcaster could really make headway in the small markets. DirecTV already offers local TV stations in about 100 markets, planning to add more markets as quickly as it can marshal the technology.
Hartenstein also said that DirecTV’s partnership with TiVo to offer a digital video recorder built into the satellite receiver has shown promise in test markets and could prove a major subscriber lure in the next few years. He calls the ease and convenience of DVRs “a transformative experience” for TV viewers. When word of mouth starts building momentum, he said, “we won’t be able to build the TiVo boxes fast enough.”