The couch potato conundrum - direct broadcast satellite television

Brandweek, June 29, 1998 by Tobi Elkin

ILLUSTRATION BY JOHN UELAND

Welcome to a techno-revolution where TV is becoming a relationship, cable a dinosaur and the losers the next 'Beta.'

Technology keeps telling us we don't have enough: enough choice, enough power, enough disk space. Seventy-eight channels, a veritable fount of entertainment 20 years ago, we are told increasingly, has begun to get stale in the sound-byte conditioned, "cutting-edge"-obsessed consumer mind of the late 1990s. Consumers need more entertainment, delivered more efficiently into their homes, played better on more space-aged hardware. The merest walk to the video store is a waste of time and effort that digital technology will save us.

At least that's what the marketers of the next generation of entertainment technology would have us believe. Direct Broadcast Satellite (DBS), for example, the first entertainment platform to offer digital TV services to consumers nationally via satellites hovering high above the earth, offers consumers a nearly 200-channel universe served up in razor-sharp digital video and CD-quality sound-enough choices to keep even the most Homer Simpson-esque couch potatoes fortified and happy. Impressive, perhaps, but this new techno-revolution is not so much about what the next generation of software providers can provide, but in how many different marketers across a spate of hardware formats, offering myriad packages and points of content difference movies and/or sports galore, clearer picture, smoother interface with your Bose surround sound speakers or whatever are trying to get their feet in the door of the American TV room. Elbowing for first crack at the family home theater an the Internet, via personal computer s set-top box receivers such as Philips' WebTV, telephone lines and cable, plus new media formats such as DVD (Digital Versatile Disc) and Divx, another form of DVD each vying to own a chunk of consumer mindshare. In the immediate future, that's a lot of choices for the technophile or early adopter to contemplate, and as new technology becomes more affordable and the choices extend to more mainstream consumers, it's multi-billions of dollars worth of potential hardware turnover and programming revenue in the course of the next five years. That means the developing battle for pole position is paramount, as each player, gambling on whichever technology, looks to avoid becoming, or vesting interests in, the next Beta.

In that light, the DBS category faces the task of shifting its position and lot from niche service to a prime contender in the home entertainment arena. Of the $23.1 billion U.S. satellite revenues in 1997, $13.2 billion went to retail subscription satellite services, according to the Satellite Industry Association; and that, even as the DBS category is only now closing in on 10 million subscribers in the U.S., according to Sky Trends, a Golden, Colo.-based satellite industry newsletter. Video store shelves, bereft of hot movie titles, and cable, with notoriously poor customer service, limited flexibility and sharp monthly rate increases, could be hardpressed to match the quality of dozens of pay-per-view channels, regional, and other unique sports packages, special event programming and a plethora of multichannel premium movie choices that DBS offers. Yet the degree of choice, flexibility and value offered by state-of-the-art satellite TV services are still new to most consumers. Four years after the nation al launch of the Digital Satellite System (DSS), the leading satellite TV hardware platform, DBS providers have done little in the way of establishing themselves as bonafide entertainment brands.

"DBS doesn't enjoy top-of-mind awareness," said John Reardon, EchoStar president, and former president of MTV. "The average consumer knows it's there, but is very confused and doesn't know much about it."

This is in spite of the fact that DSS, supported by programming providers DirecTV, a unit of General Motors' Hughes Electronics and U.S. Satellite Broadcasting (USSB), and consumer electronics brands like RCA, Sony, Panasonic, Toshiba and Hitachi, became part of the most successful CE product launch ever. More than a million DSS receivers and 18-inch pizza-sized dishes were sold within the first year of the product's launch, from June 1994 through June 1995, according to the Consumer Electronics Manufacturers Association (CEMA), Arlington, Va. The debut of DSS eclipsed VCR sales, both Beta and VHS formats, which took five and four years, respectively, before reaching 2 million units sold in 1980. CD player sales only hit the one million mark two years after their entry into the consumer market in 1983.

Still, most of the marketing efforts by the DBS providers have been price/promotional in nature, strategic strikes designed to reel subscribers in quickly. But as the living room becomes the dominant battleground in the race to provide content, no matter the delivery system, analysts say content aggregators, i.e. satellite TV packagers, will need to create relevant enough brands to secure consumers now confronted with more home entertainment options than ever. This "war for the eyeballs," as Andy Grove, Intel's founder and chairman put it two years ago, has raised the stakes for all comers and is compelling DBS providers to build and deploy brand strategies quickly amid the flood of content and digital formats. After all, DBS' real competition remains cable.