Word: echostar
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...former French utility company, Vivendi Universal, has paid $10.3 billion for the entertainment assets of USA Networks, hired Barry Diller to run them, and then bought 10 percent of EchoStar-Hughes to get those entertainments coursing over five Universal channels into some 16 million U.S. homes...
...they're going to try to do it with satellite. Why? Vivendi chairman Jean-Marie Messier settled on EchoStar-Hughes (which owns DirecTV) for the same reason Rupert Murdoch wanted Hughes before EchoStar moved in. Most of the nation's cable lines are in the hands of rivals like AOL Time Warner (parent company of this writer) and half-rivals like AT&T Broadband and Comcast who have plenty of content-distribution deals already inked - making reasonably priced access via cable into the U.S. couch-potato market hard to find. Making EchoStar-DirecTV and its control of 90 percent...
...while satellite is a unified nationwide network as soon as you pull the dish out of the box. And while satellite-TV service, with an average rate of $27 a month (plus the dish), is still more than the $16 for analog cable, digital cable averages $49 a month. EchoStar knows full well that cable rates have gone up 35 percent since 1996, and it knows the cable-operator M.O. - get people hooked up to basic, and then tantalize them with add-ons. That's why it's been aggressively targeting cable-dissatisfied markets with...
...EchoStar has a cozy content provider/programming partner, something it said it was having trouble finding (for the same reasons as Vivendi was having trouble getting on cable systems) with a big library, and an extra $1.5 billion to help the war of attrition against cable. Vivendi, for only $1.5 billion (a heck of a lot less than, say, AT&T Broadband and its 18 million homes are going for these days), gets a direct pipeline into 16 million U.S. homes (6 million, if the EchoStar- DirecTV deal gets spiked) with none of the hassles of actually owning things like cables...
...Ergen brushed aside antitrust concerns, arguing that the relevant market is not satellite TV but all of pay TV--including satellite and cable. EchoStar currently has 6 million subscribers (who pay between $21.99 and $69.99 a month in programming fees). If the deal were to go through, the new company's 16 million subscribers would be only slightly more than the customer base of No. 1 cable company...