EchoStar ups DVR War

Sep 8, 2003  •  Post A Comment

Well, Michael Powell was right on this one. The Federal Communications Commission, led by Chairman Powell, last year quashed the proposed merger between the nation’s top satellite TV providers, DirecTV and EchoStar. Mr. Powell said the deal would reduce consumer choice because it would virtually eliminate competition in the dish industry. Of course, Mr. Powell, a Republican, did not add that GOP puppet master Rupert Murdoch was pulling the strings so he could buy DirecTV. And a fawning media, which views Mr. Powell’s every move as a profile in courage, also did not make the connection when Mr. Murdoch actually did purchase the satellite TV service.

But whether Mr. Powell’s motivations were pure, his decision was sound. DirecTV and EchoStar are now locked in a war for subscribers, giving the satellite TV viewer unprecedented options in new video services. And the current weapon of choice is the digital video recorder.

EchoStar just announced it will give away DVRs to new subscribers who sign up for 12 months of programming. (The only charge is a $49.99 activation fee.) The set-top, which also includes an EchoStar satellite tuner, can record up to 100 hours.

EchoStar CEO Charlie Ergen, is clearly taking a shot across DirecTV’s bow. Over the summer, DirecTV launched an expensive ad blitz for its TiVo DVR service, in which the satellite provider has an equity stake. But EchoStar’s “Free DVR” campaign points out that the TiVo-DirecTV receiver costs more than $200. In addition, EchoStar’s DVR can skip commercials with a 30-second fast-forward button, unlike TiVo, which requires users to manually zip past ads.

“It’s time for us to go out there and differentiate ourselves from TiVo,” EchoStar Executive VP Soraya Cartwright told the Rocky Mountain News. “We’ve got an incredible product, and it’s free. It doesn’t get better than that.”

For DirecTV, it couldn’t get any worse. The satellite TV service, which added 56,000 new TiVo subscribers in the second quarter, believes DVR owners are more likely to buy premium programming packages-and less likely to switch to another video provider. But DirecTV could lose the rapidly growing DVR audience unless it matches EchoStar’s offer. TiVo is unlikely to add a 30-second “commercial-skipping” button, which would alienate the networks and studios. (That’s not a concern at EchoStar headquarters; Mr. Ergen likes to thumb his nose at the entertainment establishment) However, DirecTV may have to start offering discounts on its TiVo receivers, if not actually giving them away.

Of course, the winner of this war is the American consumer. In the coming weeks, I predict that the satellite providers will engage in similar battles over other new video services, such as high-definition TV and interactive TV. The competitive atmosphere will keep prices down and customer service up. And the cable TV industry will be forced to follow suit to prevent its customers from seeking better deals.

Who knew Michael Powell could be so prescient?

Phillip Swann is president and publisher of TVPredictions.com. He can be reached at Swann@TVPredictions.com.