Satellite providers slowly stealing cable subscribers - East Valley Tribune: Business

Satellite providers slowly stealing cable subscribers

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Posted: Sunday, March 20, 2005 6:46 am | Updated: 9:18 am, Fri Oct 7, 2011.

The battle for pay-TV subscribers intensified in the past year while all cable and dish providers in the East Valley claimed victories.

The battle for pay-TV subscribers intensified in the past year while all cable and dish providers in the East Valley claimed victories.

"You could turn back the clock a decade ago and you really had one choice, and that was your cable company," said Bruce Leichtman, president and principal analyst at Leichtman Research Group. "Today there is a choice and 25 million people have chosen to get satellite TV. Yet at the same time, 67 million people have chosen to keep cable TV. Cable is certainly still the leader."

In December, Cox Communications Arizona announced it reached the "2 million subscriber milestone" statewide. That’s up from 1 million subscribers in spring 2002.

While much smaller than Cox, CableAmerica added 10,000 new subscribers in the past year, increasing its total subscriber base to 47,000.

"We expanded heavily into Pinal County last year and we now have our fiber lines all the way from Mesa to Coolidge and Florence, through what we know as the Johnson Ranch area," said John Mori, CableAmerica’s marketing director.

As for satellite, both DirecTV and DISH Network claim huge increases in subscribers during the past year. Both would only provide national figures and would not disclose the number of subscribers in Arizona.

"Last year was a really stellar year for us," said Jade Ekstedt, manager of communications at DirecTV. "In the fourth quarter we brought on about 444,000 net customers, which allowed us to end 2004 with a full record of 1.7 million new customers. Right now we have almost 14 million customers nationwide."

DISH Network announced last June that it had reached 10 million subscribers, and that number has since surpassed 11 million, spokesman Steve Caulk said.

"Over the last five years we’ve grown faster than any other pay-TV company in the nation," he said.

The heated competition works in the consumer’s favor because it means they will continue getting more and paying less as providers continue striving to attract new subscribers and retain their current ones, said Jimmy Schaeffler, a senior multichannel television analyst with The Carmel Group.

It doesn’t mean consumers are always going to get a great product and great service, he said.

"There are going to continue to be ripoffs because that’s the nature of the business," Schaeffler said. "Let’s just say the more competition there is in this universe, the less likely it is that people can get away with that on a longterm basis."

HIGH-GROWTH MARKET

In areas where cable operators are weak, satellite providers came on strong and grabbed more customers last year, Leichtman said.

"Generally Cox is a strong cable operator and that has an effect on satellite penetration in those markets," he said. "Nationally, Cox lost 4,000 subscribers last year, whereas the top 10 (cable) operators lost about 600,000 subscribers. Cox has a strong reputation as a good provider. They’re not the largest, but they’re very strong in the markets that they’re in."

Population growth in the Valley also plays a big role in changes in market share among cable and dish providers, Leichtman said.

"New movers is when there’s the opportunity for either player, and a strong company like Cox may not have the reputation with a new mover that it would with an existing resident," he said. "Satellite may have a better opportunity there."

Cox has started recovering its core market share in Arizona after losing to satellite providers, said Ivan Johnson, Cox Arizona’s vice president.

"In the western region, we gained 76 percent of the total company net gain, and Cox is one of the few companies that has continued to grow core customers," he said. "We are starting to take back market share. That is not typical in the industry today. We have growth that comes from new homes . . . but if you’re increasing your overall market share, it cannot be just from new home growth."

DISH Network and DirecTV have been more aggressive than cable operators in deploying digital video recorders (DVR) and highdefinition TV service, Schaeffler said.

"In terms of (new) subscribers, satellite in the last year is way, way ahead of cable," he said. "Most of those satellite subscribers have come over from cable in the last year. But the growth is going to slow down in 2005. You can only keep acquiring that number of subscribers so long and then the low-hanging fruit, even the middle-hanging fruit, is picked. So you have to climb a little higher and work a little harder to get subscribers after that."

DirecTV is going to be expanding its DVR offering and adding more highdefinition channels, as well as launching new satellites this year to expand programming, Ekstedt said. Its NFL Sunday Ticket has continued to draw subscribers from all other pay-TV providers, she said.

Aside from Cox and CableAmerica, Qwest has been making its Choice TV digital video product available in more areas throughout the Valley, said spokesman Jeff Mirasola. It is now available in Chandler, Gilbert, Scottsdale, Paradise Valley, Buckeye, Phoenix, parts of Maricopa County, Glendale and Peoria.

HIGHER COSTS

All of the pay-TV providers except Qwest have increased their rates in recent months, and they all blame it on higher programming costs.

But they’re all quick to point out that their competitors’ rates are higher.

Mike Keenan, sales manager at Planet Earth Satellite near the Tempe-Phoenix border, said many people are switching to satellite because they’re tired of the high cost of cable.

"Here locally the large percentage of the customers who we attract are people who are just upset about the cost of rate increases," he said.

In February, DISH Network announced an average price increase of 4.3 percent on its service packages. The price for its America’s Top 60 package with local channels increased from $29.99 to $31 a month, while the price for its America’s Top Everything package with local channels increased from $82.99 to $86.99 a month.

"We’ve always made sure to keep our prices under what cable’s charging people," Caulk said. "We’re not exactly sure why the cable industry has chosen to make their service so expensive, especially the digital cable."

This month, DirecTV implemented price increases that added $2 to the monthly cost of its Total Choice with local channels and $3 to the monthly cost of its Total Choice Premiere with local channels.

Last month, Cox increased the price of its video service by $2 per month or 5 percent. The company is quick to point out that this was its first rate hike since April 2001, while its satellite competitors have raised their rates annually since 2000.

CableAmerica increased its rates this year, which amounted to an additional $1.05 or 2.8 percent per month for its basic package, Mori said.

Qwest did not increase the cost of its Choice TV service in the past year, Mirasola said. Its cost remains $39.99 for Qwest telephone and Internet customers and $44.99 for noncustomers.

HIGH DEFINITION GROWING

High-definition TV service is now in 10 percent of homes across the country and that percentage will continue to grow despite that fact that HDTV remains an expensive option for consumers because of the high cost of HD and HD-ready TVs, Leichtman said.

All of the cable and satellite providers offer HDTV service and expect to see continued growth in the number of subscribers for that service.

The cost of HDTVs and HD-capable TVs is already dropping, allowing more people to become HD subscribers, Johnson said.

"The majority of new TVs that are sold actually are HD," he said. "Our HD service is free. All we charge for on HD is the converter that allows you to see HD services. HD is something that’s like color TV 40 years ago. It’s going to be very gradual, but it is something that has grown significantly for us. It’s something that a few years ago we had no customers and now we have tens of thousands. And we don’t even market it."

DISH Network not only provides HD service, but manufactures and sells HD monitors, Caulk said.

"We offer the only true HD turn-key system in the industry, where you can call us and say ‘I don’t have any HD equipment, I don’t know anything about HD, can you just come out and hook me up,’ " he said. "You can call us and say I want that $1,599 monitor. You buy that, you own that and then you sign up for the HD programming."

HD is really going to take off once manufacturers start producing HD-ready TVs at lower prices, Mori said.

"Although the demand is growing every day," he said.

Cable services

CableAmerica

In the East Valley, CableAmerica is available in Mesa and Queen Creek. It includes basic cable with 22 channels up to full digital cable with premium channels.

Monthly cost: $14.95 for basic cable to $79.90 for full digital service.

Repairs: Covered.

Cox Arizona

Cox Classic, which includes 99 channels, including local programming. Cox Digital includes one of several tiers with additional programming, interactive program guide, pay-per-view channels and Music Choice channels.

Monthly cost: $42.99 for Cox Classic. Cox Digital starts at $45.95. Premium channels are extra.

Repairs: Covered.

Qwest

In the East Valley, Choice TV is available in Chandler, Gilbert, Paradise Valley and Scottsdale. It includes 138 channels, plus music and premium channels.

Monthly cost: $39.99, or less when combined with telephone and/or Internet service.

Repairs: Covered.

Satellite services

DirecTV

Packages range from Total Choice, with more than 130 channels, to Total Choice Premiere, with more than 210 channels including more than 30 premium channels.

Monthly cost: From $41.99 to $93.99 with local programming. Free installation and equipment with one-year subscription.

Repairs: Extra.

DISH Network

Packages range from America’s Top 60 to America’s "Everything" Pack, which includes America’s Top 180 and 31 premium movie channels.

Monthly cost: From $31.99 for America’s Top 60, with local channels, to $86.99 for America’s "Everything" Pack, with local channels. Free installation and equipment.

Repairs: Extra.

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