EchoStar's Cable Target: 1 Million Subs

EchoStar Corp. LLC (Nasdaq: SATS) will arm mid-sized MSOs for battle with satellite and telco TV rivals using an integrated system highlighted by Sling-loaded DVRs, a media-rich navigation system and a broadband-fueled, over-the-top (OTT) video-on-demand (VoD) offering. (See EchoStar Arms Tier 2 MSOs for War .)

You could be forgiven for thinking that sounds vaguely familiar -- it's similar to the kind of technical lineup Dish Network LLC (Nasdaq: DISH), EchoStar's corporate cousin, is putting into play now. (See Dish Makes Its Adaptive Streaming Move, Photos: Dish Network's Retailer Summit and Dish: TV Everywhere Site Is Portal to Growth .)

But there are some differences. EchoStar's new video ecosystem for cable, called "Aria," is designed to work with existing headends and networks based on Motorola Mobility LLC and Cisco Systems Inc. (Nasdaq: CSCO) gear. Although EchoStar is intrigued with the idea of using more elegant downloadable conditional access systems, it will equip its Aria boxes with CableCARDs so they can run on most US cable digital video environments.

EchoStar's been targeting Tier 2/3 U.S. MSOs with set-tops for a while now, but has enjoyed limited success. In May 2010, rumors emerged that CableOne was looking at EchoStar and TiVo Inc. (Nasdaq: TIVO) to fulfill its advanced set-top box needs and that the operator was particularly sweet on EchoStar's Sling technology. Unitymedia GmbH of Germany (now part of Liberty Global Inc. (Nasdaq: LBTY)) has been buying EchoStar-made HD-DVRs (sans any Sling capabilities) that use Nagravision SA security. (See Cable ONE Sizes Up EchoStar, TiVo Set-Tops and EchoStar Gains Foothold at Unitymedia.)

But instead of focusing on just place-shifting and set-top boxes, EchoStar is preparing a broader video ecosystem approach that also factors in more intuitive, hi-def guides, an OTT VoD platform that can help MSOs flesh out their TV Everywhere initiatives and tap into the adaptive streaming technology EchoStar now has following its purchase of Move Networks. And instead of selling set-tops like cupcakes, EchoStar plans to sell MSOs on services using a recurring, per-subscriber revenue model. (See EchoStar Moves in on Move Networks.)

"Don't fight over-the-top. It's coming," EchoStar VP of sales and marketing Michael Hawkey says of his company's new message to cable operators.

Aria is also a significant departure from EchoStar's original set-top strategy, which was largely focused on tru2way and the nation's top five MSOs.

And EchoStar has some grand goals in mind this time for an addressable U.S. market that it views to be about 8.9 million subs. Hawkey says the target is to have 1 million cable subs by the end of 2013. He expects trials to start this year.

Hawkey says Aria is also agnostic in terms of content origination, as it's able to support services piped in from the Comcast Media Center (CMC) , Avail-TVN or EchoStar's own ViP-TV. It expects to outline an updated cable box lineup at The Cable Show this month in Chicago.

Why this matters
Smaller MSOs without lots of capital and internal engineering to tap into have struggled to keep up with larger satellite-TV rivals and, in some cases, telco TV providers. That lack of resources has also prevented many of them from launching services that larger MSOs are now deploying.

That also means they are becoming more attracted to signing up tech partners that can give them soup-to-nuts approaches that allow them to deliver services like VoD and catch up on new initiatives that consumers want, such as the ability to extend subscription video services to iPads and other connected devices.

But EchoStar will have lots of company. Motorola's the general Tier 2/3 cable video incumbent, and EchoStar is going after a market already targeted by Evolution and TiVo and more recently by Adara Technologies Inc. , which is trying to gain ground using a mix of Cisco Systems Inc. (Nasdaq: CSCO) boxes, guides and switched digital video.

EchoStar has historically had to deal with the stigma that comes from being linked to a cable competitor in Charlie Ergen and Dish, but Hawkey is hopeful that EchoStar's value proposition will help cable's operators overlook that.

For more
Read more about cable's Tier 2/3 market developments and EchoStar's cable ambitions:

— Jeff Baumgartner, Site Editor, Light Reading Cable

cmmurrey 12/5/2012 | 5:03:17 PM
re: EchoStar's Cable Target: 1 Million Subs

"And EchoStar has some grand goals in mind this time for an addressable U.S. market that it views to be about 8.9 million subs. Hawkey says the target is to have 1 million cable subs by the end of 2013."

How do you think he arrived at the 8.9 million sub number? Is this the total number of Tier 2/3 U.S. MSOs?

cmmurrey 12/5/2012 | 5:03:16 PM
re: EchoStar's Cable Target: 1 Million Subs

Wow. That is a pretty sizeable market for TiVo/Evolution & EchoStar to address. Out of this 7.6 million cable subs what do you think the DVR penetration is currently?

Jeff Baumgartner 12/5/2012 | 5:03:16 PM
re: EchoStar's Cable Target: 1 Million Subs

It's the addressable market they have defined internally, but it's about 1.3 million more than the 7.6 milion cable subs served by the members of the American Cable Association, which reps smaller, independent MSOs.  JB


Jeff Baumgartner 12/5/2012 | 5:03:14 PM
re: EchoStar's Cable Target: 1 Million Subs

Haven't heard much in terms of the penetration of DVRs in the tier 2/3 cable market... although the addressable market sounds large, anyone going in will get just a fraction of that , of course. But EchoStar's goal sounds pretty aggressive. JB

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