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Satellite TV Sows Seeds For Recovery

Direct broadcast satellite platforms are the latest old media to be perceived as vulnerable in the digital revolution. Share prices of DIRECTV and EchoStar Communications (DISH) are off sharply in recent months.

But investor concerns seem overblown because the two DBS platforms are still growing and are well along with plans to address weaknesses. Kagan Research newsletter Digital Televisionforecasts the DBS sector controlled by these two giants will swell to 35.5 milllion subscribers in the U.S. by 2015. That represents a 2.7 percent compound annual growth rate (CAGR), a solid performance given growing competition.

To give skeptics their due, that CAGR would be a sharp de-acceleration of headcount growth as the multichannel marketplace gets increasingly saturated. But what the doomsters often overlook is that the base of TV households is expanding. Kagan puts TVHH growth at about 1.3 percent per year over the next decade.

Both DBS platforms are well advanced in introducing national basic channels in high definition, and are ramping up local broadcast signals in HD. DIRECTV is scheduled to expand HD broadcast from 12 markets at the end of this year to 36 in early 2006. EchoStar expanded its HD content quickly earlier this year when it acquired assets of Voom, a rival that shuttered as a standalone platform.

Kagan Research expects HD will dominate the DBS subscriber base within a decade, as the graphic above indicates. Digital Television estimates the DBS platform will account for a constant one quarter of all HD subscribers over the next decade, thus holding its competitive position against cable, telco IP video and other TV platforms.

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