THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Tuesday, August 30, 1994 TAG: 9408300363
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY DAVE MAYFIELD, STAFF WRITER
DATELINE: VIRGINIA BEACH LENGTH: Long : 109 lines
Patricia Gearhart can't get cable and can't stand the thought of a ``humongous'' satellite dish in her back yard.
So when the latest innovation in TV viewing - a pizza-sized dish that receives dozens of channels - arrived in Hampton Roads about two weeks ago, Gearhart was quick to buy.
She is among hundreds of thousands of Americans who are expected to buy the new dish systems this year.
``What I see looks good so far,'' says Gearhart, who lives with her husband on a five-acre spread off Landstown Road.
Gearhart's view of things is shared by the people behind the new dishes.
Those involved in making, programming or selling DSS - Digital Satellite Systems - say they have been pleasantly surprised by customer reaction to the new technology.
``Sales have been going very well,'' says Steve Blum, spokesman for the St. Paul, Minn.-based United States Satellite Broadcasting Inc. ``If you talk to retailers in any of the early markets, they're selling out of units almost as fast as they get them.''
U.S. Satellite provides one of the two programming packages for the new 18-inch dish systems. General Motors Corp.'s Hughes Electronics unit, which offers the other programming package called DirecTv, is the lead developer of the $1 billion satellite venture.
Virginia is one of 12 states in which the small-dish systems have been introduced for retail sale since mid-June. Stores in the rest of the Lower 48 are scheduled to get the systems by October.
The systems, manufactured under the RCA brand name by Thomson Consumer Electronics Inc., sell for between $700 and $900. Plus, there is a monthly fee for the programming services, ranging from $8 for six channels to $75 for more than 50. And those prices don't include charges for pay
per-view movies and events.
But early buyers of the systems and their services, like Gearhart, say the price is worth it.
Some industry analysts say the quick sales of DSS systems point to the vulnerability of traditional cable operators. A flock of new competitors ranging from phone companies to so-called ``wireless cable'' outfits that use microwaves to transmit TV signals is swooping in on the video turf.
``There is a good chance of them being hits,'' Tom Wolzien, a cable analyst with Sanford C. Bernstein & Co. of New York, said of the DSS services. ``The programming is pretty innovative, and it could keep cable from expanding into rural areas.''
Indeed, a large percentage of the early buyers of DSS systems nationwide live in areas that cable operators haven't yet reached. Gearhart, of Virginia Beach, is one.
But Lee Whedbee, president of Domes Satellite Inc. of Chesapeake, said he has also sold systems to people who are cable-ready but would rather do without cable.
In the two weeks since he received his first shipment of 21 DSS systems, Whedbee says he has sold all but two. His biggest concern now, he says, is keeping enough in stock. ``Every time they roll out product in another area,'' he says, ``that just sucks up the inventory.''
Circuit City Stores Inc. has seen similarly brisk sales, says Paul Rakov, a spokesman for the Richmond-based chain. ``It's certainly one of the more exciting products in this category to come along in some time,'' Rakov says.
When the two DSS satellites transmit at full capacity within the next year or so, says Blum at U.S. Satellite, subscribers to the USSB and DirecTv services will have a choice of as many as 180 channels. The channels will include multiple versions of popular premium cable networks like HBO and Cinemax, many of the so-called basic cable networks like ESPN and Family Channel, plus pay-per-view movies and sporting events.
Domes' Whedbee says the prices for services are comparable to traditional cable's, but about double what one who owns a larger dish would pay. However, the larger dishes, the most popular of which are 7 1/2 feet in diameter, also cost more up front: generally between $2,000 and $3,000.
Whedbee says the near-laserdisc sound and picture quality of DSS, while generally superior to cable's, is not as high as that of the best large-dish systems. But the differences between the small and large dishes are indecipherable for most users, he says.
How many of the small dishes will sell? DirecTv executives predict 3 million customers by 1996, 10 million by the turn of the century.
But some analysts are doubtful.
Cable giants like Tele-Communications Inc. and Time Warner are spending billions of dollars to build 500-channel systems that will offer everything that DirecTv will offer, and more. The cable companies are also upgrading their own satellite service, called Primestar.
``The question is, what can DirecTv deliver that others can't?'' asked Arthur Gruen, a partner in Wilkofsky Gruen Associates, a media and entertainment consulting firm based in New York.
Another handicap for the new DSS services is that they are not permitted by the nation's top three broadcast networks, ABC, CBS and NBC, to carry their programming except in areas that the networks' local affiliate stations can't reach.
That is significant because despite the growing popularity of cable networks, the big broadcasters still attract about 65 percent of prime time viewers. MEMO: Bloomberg Business News contributed to this report.Bloomberg Business
News contributed to this report. ILLUSTRATION: Photo
The 18-inch disc can rest on a window sill and is about as easily
installed as a garage-door opener.
Graphic
THE NEW SERVICES
[For complete graphic, please see microfilm]
by CNB