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DirecTV Pushing HD Options

Aug 29, 2005  •  Post A Comment

With high-definition television set prices in a sudden free fall, DirecTV is scrambling to implement an unprecedented array of technology and programming options in time for the holiday season to attract new HD subscribers.

The News Corp.-controlled satellite provider has been launching satellites to expand its HD offerings and plans to soon roll out a proprietary HD receiver capable of processing next-generation MPEG-4 compression streams, which will ease bandwidth constraints.

“Everything our retailers are telling us is that they expect this season to break all records for [sales of] high definition and flat screens, so it’s important to have the local [channels] up and new receivers up and in the major markets prior to the holiday season-which we will do,” said Bob Marsocci, VP of communications for DirecTV.

Trouble is, cable operators in most markets currently offer less expensive HD packages with more channels than DirecTV, which charges customers hundreds for an HD receiver-a competitiveness gap DirecTV CEO Chase Carey acknowledged during a recent second-quarter earnings conference call. Then there’s satellite competitor EchoStar, which this summer gobbled up the HD Voom channels from Cablevision and cut its HD package prices.

“If you look at the comparative offerings today, cable has the better offering, plain and simple, and that’s a dangerous place to be,” said Bruce Leichtman, president of Leichtman Research Group. “DBS has been so successful getting the high-end subscriber, if they don’t act quickly, they can lose them. What’s working in DirecTV’s favor is the cable operators have not been as aggressive at exploiting their advantages as they should be.”

With subscriber growth slowing during the last quarter, DirecTV has recently dropped the price of its premium HD DVR receiver from $999 to $699 and then to $499. When its as-yet-unnamed MPEG-4 receiver debuts, DirecTV will lose a longstanding requirement that customers must own their equipment and offer a monthly rental option-just like cable operators, executives said.

DirecTV also plans to offer HD versions of local broadcast stations, a key programming service for attracting HD customers, available by the end of the year in its 12 top U.S. markets-New York, Los Angeles, Chicago, Philadelphia, Boston, San Francisco, Dallas, Washington, Atlanta, Detroit, Houston and Tampa, Fla.

But implementation of the new services is coming down to the wire.

The MPEG-4 receivers were supposed to be released this fall, but were pushed back. The receivers will hit the first test market in October and the first 12 markets “by end of the year,” said Eric Shanks, DirecTV’s senior VP of advanced services and content.

ESPN2, a long-sought channel among DirecTV’s core sports-fan contingent, is finally coming online Sept. 9. Another key channel, TNT HD, is still absent from the service.

The rollout also means converting about 500,000 existing HD subscribers to the new receivers, which are expected to cost subscribers between $250 and $275.

Mr. Shanks would not promise a free upgrade, but he said the transition would be “as painless as possible.”

To support the addition of local HD signals and new receivers, DirecTV plans to launch marketing campaigns in key cities, though details are not yet available.

“The holidays are the busiest subscriber growth period in any given year, coupled with cable becoming more competitive,” Mr. Marsocci said. “We’re going to have pedal to the metal when it comes to marketing product and service.”

Looking ahead, DirecTV plans to have 1,500 local HD channels and 150 national HD channels by 2007.