EchoStar Communications Corp. -- the upstart in the direct broadcast satellite television business -- gave the nascent industry a major jolt this month with a sharp price cut.
The jolt reverberated earlier this week when Thomson, the U.S. unit of France's Thomson-CSF, which dominates the satellite TV dish market, matched EchoStar's new price at $199 for a satellite dish.
Thomson executives said the new price will surely shake up the industry and fuel sales for what is said to be the fastest growing consumer electronics product ever -- one that even now is taking market share from the cable industry.
"It will completely change the nature of the business," said Joe Clayton, an executive vice president at Thomson.
Thomson's move cut the price of the RCA brand digital satellite system by as much as $200 a unit. Combined with a $200 cash back offer by programming providers DirecTV, a unit of Hughes Electronics Corp., and U.S. Satellite Broadcasting Co., it cut the total price to $199 for consumers who pre-pay for one year of programming.
Programming costs from $29.95 a month for 70 channels on DirecTV to $44.95 a month for all 175 channels on DirecTV.
The lower price -- while welcome for consumers -- will make it harder for new entrants to break into the market and make a profit.
Other consumer electronics giants, Uniden America Corp., Toshiba America Consumer Products Inc., Samsung Electronics Co. Ltd. and Matsushita Electric Corp of America have announced plans to introduce new DSS systems later this year.
Thomson will make the dishes for Toshiba and Panasonic.
"We know the telcos and the cable companies are getting more involved," Clayton said. "We are going to capitalise on our strengths now."
He added that the $199 price will make the "awareness base explode."
Thomson has an estimated 45 percent of the digital satellite system dish market, which amounted to 3.4 million units worldwide at the end of July, according to the Carmel Group.
"It's been a real winner for them," said Jimmy Schaeffler, an analyst at the market research firm in Carmel, Calif. "Plus it has launched them into the international marketplace."
Schaeffler said satellite television is gaining markets outside the United States where there is no cable service because it does not require installing massive cable systems.
"Most of the rest of the world is not very cable wired, so there is a clear opportunity for direct broadcast satellite," Schaeffler said. Satellite TV is also becoming big in this country while vaunted digital cable systems undergo trials.
New competitors see an opportunity in digital satellites -- a technology that is already here and working. MCI Communications, aligned with Rupert Murdoch's News Corp. Ltd, already has a valuable U.S. satellite slot.
The move to cut prices to gain market share is changing the industry, which Clayton said is moving more toward a cellular telephone model, where the hardware is the lowest cost -- sometimes practically nothing -- and revenues come from services and programming.
"They have to fight within the industry and competitors from outside the industry," Schaeffler said. "They are doing the rebates because of the market share. It's a combination of EchoStar pushing everyone to a lower price point nationally and the effort to maintain and acquire future markets."
Asked how low prices of satellite dishes could go, Clayton joked that he had never seen prices in consumer electronics products go up. Other analysts also expect prices to keep falling.
"Maybe Charlie will take it to zero, but I don't think we will," Clayton said of EchoStar Chairman Charles Ergen.
A spokeswoman said Englewood, Colo.-based EchoStar, which launched its satellite network in March, already has 125,000 subscribers for its programming, which has 40 TV channels and 30 channels of music, compared with 175 channels offered by DirecTV.
The launch next month of a second satellite will increase its offerings to up to 200 channels, EchoStar said.
