DBS business plan is a loser

[jzoomer]

With the merger dead and some real competition from digital cable, one has to wonder whether the current business plans by satellite providers make sense. I think that in a couple of years, DBS type satellite business will go the way of C-band and PrimeStar in the major cities.

I got satellite TV for the excellent picture quality and large number of channels. This was leading edge technology that was superior to the local cable offering. Satellite TV increased their appeal to me with HDTV that was not available on cable. The addition of PVRs and DVRs also enhanced the satellite experience.

But in a big market that I live in, cable (Time-Warner) has fought back and is offering the same or better than what I currently have including HDTV. They are even offering DVR technology (although I don’t know if it does HDTV currently). I get all of my locals without an antenna farm and the overall price is less than DBS. This is happening while DBS keeps stuffing more DMAs with poorer picture quality. Judging by other posts, I think some of you are seeing the same thing.

It seems to me that the local-in-local push by the satellite providers will become their Achilles’ heel. They will stuff more channels of large DMAs with poorer picture quality while digital cable fights back with better picture quality. This problem will be accelerated as more and more local HDTV content becomes available. There is no way that either satellite provider can offer local HDTV content in their current markets. This is a battle that they can’t win with the current technology.

The end result is that satellite will be driven from the major DMAs to be relegated to the smaller DMAs and farms of America. Unfortunately that is not a real money making prospect for DBS and will likely force one or both of them out of business. Prices to these areas will go up because it is unlikely that a cable company will invest to distribute in a sparse area. This outcome would be ironic in lieu of the FCC decision and some rural organizations that fought the merger.

Neither satellite company is currently making money and their prospects of making money any time soon is not there. They will have difficulty in raising capital in the current economy to change to some new technology that can solve this problem for them. I think that the only way that they can keep major DMA people like me is to offer more HDTV and better picture quality. Unfortunately for me, that isn’t the business plan of either satellite provider.

So I am sitting on the fence right now. I have satellite but I am not buying anymore equipment for it. I have a cable modem, but I still am leery of jumping to digital cable.

[navy8ball]

i have E and also have basic cable from cox.i am constantly having a reception problem on cable they have been to my house 3 times now trying to fix it and they just cant get it right.i get tired of having to take a day off to hang around while they keep replacing all of the same connectors they replaced before the problem is on their end before it gets to my house but they dont seem to understand this.i love my dish and i dont believe i will ever switch back to cable.

[Geronimo]

I will guaratee you that the PVR does not do HDTV. In my area (close in suburn=ban) the price for digital cable is SUBSTANTIALLY higher than the price for satellite and noit all channels are digital.

I wonder wha twill happen if and when HDTV talkes off., Ther just isnt the bandwidth out there right now. But I am in no rush to go back to cable.

[raj2001]

DBS type satellite business will go the way of C-band and PrimeStar in the major cities

C-band was always the domain of hobbyists and never really caught on to the consumer. This was mainly due to the large size of the antenna and the high cost of equipment. C-Band was never really intended to be a consumer service.

Primestar was bought out by DirecTV.

[Jacob S]

C-Band never had nearly as many subscribers as DBS had. Neither has Primestar or both combined.

[Cyclone]

They just need to put a few more better capable satellites up there, change out the receivers and they'll be back in business.

I don't think that Murdoch would be going so nuts over a loser business model.

[jeffwtux]

Cable IS better in cities with good cable deals. The problem is cable deals with cities vary widely within single metropolitan regions(I will never use the ambiguous 4 letter word 'area' in any of my posts, it is very offensive to me). However, there are a ton of inner cities, inner and outer,. rich and poor suburbs, and rural communitties that have lousy cable deals far worse than satellite.

[Jacob S]

By the time you have to pay the extra fee for the locals and $5 more a month per additional outlet and have to pay for the receivers, satellite can sometimes not be the better deal.

[DarrellP]

Originally posted by Jacob S
By the time you have to pay the extra fee for the locals...
If cable does not charge "extra" for locals, then why can't I get them for free? Just a thought. Try calling your local cable company and ask them this question and isten to the "Uhhhhhhh" on the other end.

[jzoomer]

When the DirectTV buyout/merger talks were started with Murdoch in the bidding, it was an entirely different business climate than it is today. The value of DirectTV was higher and the ability to raise capital to improve DBS was there. With DirectTV, DISH, and News Corp not making money, I don’t see the draw for capital under the current business plan to upgrade services to compete in the future.

I look at DISH as the same as DirectTV only a year behind. I remember Charlie stating that when he reach 5 million subscribers that he would be profitable. He has 8 million subscribers while DirectTV has 10 (or more) while neither is profitable. Growth has not turned into more profits for either company. Profit is the reason for any business.

Some reasons for this failure that I see are:

1. Churn. Both companies provide free equipment to new subscribers for only a one year commitment. They also offer reduced fees to entice new customers. If it costs $350-450 to acquire a new subscriber, how can anyone recover the costs if a customer bolts every year?
2. Piracy. Some of you believe that the air is free, but it is at the expense of others. It seems that no matter what card scheme is devised, the hackers have the answer within days of the new cards shipping. I know cable theft is there as well, but it seems that having a hard connection to a segmented cable distribution would be easier to detect.
3. Politics. It is well known that cable providers have intimate relations with politicians. Originally cities granted monopolies to one Cable Company and I’m sure donations were made to the right parties to secure those rights. The must-carry provision was a major blow to the satellite business in that it took bandwidth away from channels that people watch to ones that no one would watch. The rules favor your local cable company in the end. The DirectTV/Dish merger was the only such merger ever opposed in their history. If only Charlie had donated a little more money.

Yes, Murdoch may acquire DirectTV now, but I don’t see that solving the coming problem. He is not bringing anymore satellite capacity in his back-pocket. With his control of media content, he could force Dish out of the business which would leave you with one satellite company. Then the difference will be that Murdoch will be running the show and he does spend more money on politicians. All I can say is – Dodgers!

[DmitriA]

I doubt that either cable or satellite will offer locals once they all move to HDTV (in about 15 years, IF we are lucky) with the exception of a couple national network feeds. What would be the point - you would be able to get the same signal (if not better - no compression) over-the-air from your local station. Right now because the signal is analog, the signal starts degrading once you move away from the source, but with digital you either have or you don't. The quality is the same for everyone. And if you can't get it, then cable and satellite probably can't offer it to you legally anyway.

[Jacob S]

Yes but some will still not be able to get the digital signal in. Are these digital signals stronger than the analog ones? How much stronger? What are those people going to do that live far from the station or live in hilly mountanious regions with lots of trees?

[Chris Freeland]

Originally posted by Jacob S
Yes but some will still not be able to get the digital signal in. Are these digital signals stronger than the analog ones? How much stronger? What are those people going to do that live far from the station or live in hilly mountanious regions with lots of trees?

It will be back to the future for us satellite folks, those of us who can not receive HD TV ota will get it either by lifeline cable or a National feed from are satellite provider, most will get it ota. :)

[Mike123abc]

DBS offers 2 things that my cable company lacks:

1. HDTV, right now I get HBO, Showtime, Discovery, and hope dish picks up HDNET this year.

2. Superstations (no local WB and a low power infomercial/UPN station with bad picture even on cable).

Add to that cable would charge me $40-50/month more. Now what cable would give me:

1. Texas cable news (TWC's new channel for Texas)
2. A lot more cinemax (6 Cinemax)
3. More HBO/Showtimes (west coast feeds 10HBO, 11Showtime)
4. Local access channels

Now if the DBS price goes up, the cable company provides HDTV, and cable ready HDTV/Digital Cable sets finally get here, I would probably switch back. That is a tall order for cable to match in my area. Now it is quite doable, my cable system is modern with all fiber optic distribution, currently carries 72 analog and about 99 digital stations, and 40 music channels (very close to what dish carries).

[DmitriA]

Originally posted by Jacob S
What are those people going to do that live far from the station or live in hilly mountanious regions with lots of trees?

You'll just have purchase the distance networks from NY or LA or whatnot then...

[jzoomer]

To improve satellite’s prospect for staying in business, I would propose the following:

1. Increase the commitment time from 1 to 2 years. Cell phone companies are trying this now. They have one price for one year commit versus two year commits.
2. Focus on HDTV content instead of LIL. I think national feeds like CBSHD was a good step that could easily be followed up with an ABC feed. Both of these networks own most of their major stations. HD sports networks are also a major draw. Fox doesn’t have any HD content that would be missed. In big markets where you have good cable competition, this could distinguish DBS from cable. On smaller regions, you will have the only HDTV feeds available.

The LIL push is being done in a time where the local networks are losing market share. National networks like TNT and ESPN are getting the sport contracts that use to be exclusive to the big four. Many local stations have national feed equivalents. Spending that bandwidth on a dwindling Nelson rating channels makes no sense.

3. Cooperation between the two satellite companies could help solve the HDTV bandwidth problem. Legal issues aside, if 119 could be used for both companies HDTV channels, this would be big plus. A common more efficient encoding method would be needed as well.

[Jacob S]

When the next receiver technology is ready to be used when lots of bandwidth will really be needed, Dish and Direct could both choose the same platform before launching more satellites.

When digital signals become the norm I think the demand for satellite will go down if those digital signals will be able to be retrieved a lot easier unless there can be some very cheap packages to compete with. I think it would hurt cable as well. More people would be able to get their signal for free and the
ratings for locals will begin to increase again and more free channels will go up and will rely on advertising to make it as the cable and satellite subscriber base would decline.

Is there any deviced in which would amplify the digital signal like some kind of booser in which would help someone bring in that digital signal? Is there any signal meters in which would help aide in getting those signals in? Any special antennas that bring in the digital signal better vs. the analog?

[DmitriA]

Are you saying that all of the hundreds of cable channels right now would suddently go and build affiliate stations in every one of the 200+ DMAs in this country? And then broadcast their signal for free?! Or are you saying that once locals go digital, people would suddently realize that the 4-5 network channels is all they need and would drop cable and satellite to watch just them over the air?

[Jacob S]

I am saying that those that get satellite or cable due to poor reception would now have an alternative choice, and more channels may come to the market at that time as well. I have heard in the past that there were even going to be some premium network channels available for a price in the past while the ones we have now will remain free.

By the time this would take place dish and cable would have gained many more subs in which the loss at that time would still end up being a higher sub count than what we have now, more than likely, if it has that big of an impact. Especially if HD gets very popular and not as readily available on satellite this may happen. Some may not be able to afford satellite after having to pay that money for the digital to analog converter box or a new digital tv, or the payments on one.

There should still be a demand great enough for channels beyond the local market to keep the satellite and cable market alive. Maybe seeing the number of subs dropping their local channels when the digital locals go up will determine whether they will broadcast them and which ones they broadcast in the future.

[Turbohawk]

Cable Vs Dish providers...

Well, I've had premier Time Warner Digital Cable for 18 months now, and I can tell you, hands down, that Dish providers blow digital cable away. Better pictures, better sound, less artifacts, and Dish is less expensive to the tune of $30/month in my area.

I've taken advantage of the $199 508 deal and am looking forward to clear, crisp TV again. To those that think digital cable is better, compare both, side by side as I have, and you'll know otherwise.

I'm sure that there are some regions where cable pricing is more competitive, but out here in the outlying Austin areas, they price gouge compared to any of the dish providers. You're always renting the digital "box" receiver too, and at $8 a month after taxes you'll have more than paid for a 301 in no time.

Bottom line, cable sux.

[cnsf]

That's the first time I've ever heard that. Do you work for E*?

[scooper]

Guys - cable vs. DBS is going to be different for everybody - some cable companies are doing a great job, with better PQ and better value than DBS. Other areas (sometimes even within the same company) - DBS does better PQ / better value.