Entertainment media, increasingly, is not the safe haven it once was.  With people looking more and more to trim their budgets, entertainment is increasingly regarded as fat, excised out of the budget with merely pain rather than a risk of destruction.  As discretionary spending falls and more households take a “wait-and-see” approach to making their budget decisions, one would think a night spent at home watching TV might well be the best of all possible worlds at this point.

One would, sadly, be wrong.

The major satellite TV providers, DirecTV and Dish Network, are seeing customers cut back and peel away from their subscriber ranks.  Dish Network alone is losing subscribers at a rate of roughly two percent per month, and DirecTV is plotting price hikes, a move sure to vent subscribers in an increasingly hostile economy.

Coming out with a piece in Cable360 that shows the significant and increasingly serious problems for the satellite operators is Peter Shapiro, who wrote a telling piece called “Is Dish Cooked?”. I took a few minutes to sit down with Mr. Shapiro, and get some advance information that might tell you what to do with your increasingly valuable (and scarce) entertainment dollar.

1. For some background information, please, take a moment and tell my readers who you are.

I’ve been a cable and telecoms consultant for more than 30 years.  I’m a principal at PDS Consulting, which I founded in 2001, which supports operators, attorneys, financiers and other stakeholders in the cable & telecoms industries.  We provide opportunity assessments, due diligence studies, industry expert litigation support, and policy studies for our clients.  A copy of my doctoral thesis on formation of cable programming networks is in the collection of the Cable Center, the industry museum; so, like myself, it’s an historical artifact.  For several years I’ve been a contributing editor at CableWorld and then its online successor, www.cable360.net.  Copies of columns, an attempt at a blog, and more details about PDS Consulting can be found at www.pdsconsulting.net.

2. Since you seem to have a rather pessimistic outlook for both major satellite TV purveyors, both Dish Network and DirecTV, who is more likely to fail first, and what does that mean for current subscribers?

I’m not predicting imminent failure for either operator, although I think Dish Network will have a tougher time over the short term than DirecTV since it will lack DirecTV’s telco distribution and the financial backing that DirecTV has from John Malone’s Liberty Media Corporation. Dish Network, with almost 14 million subscribers, is unlikely to go out of business in such a way as to strand its subscribers.  It’s more likely to be merged into DirecTV once it is clear to regulators that while the two DBS players have competed fiercely in the past, their ongoing strategic competitors are the cable and increasingly telco operators, so plenty of competition will remain in the market once they have merged.   Current Dish subscribers will still be served in any case.

3. What suggestions would you offer either company in order to protect themselves?  Lower prices?  Offer more a-la-carte services?

Both are excellent providers of multichannel HD and SD video services.  Their pricing is competitive and they have attractive content.  Their problem is that they are single-product providers in an increasingly multiplay world.  Their technology does not support competitive broadband Internet access, VOD, or telephony, which are key components of the service packages of their strategic cable and telco competitors.  I don’t have an easy solution for them.

4. Given the massive investment involved in running cable to low-population-density areas / rural locations, reluctance on cable’s behalf to compete in those areas, and the pervasive foothold of DirecTV / Dish Network in those areas, does it stand to reason that Dish and DirecTV will always have a reliable customer base and thus aren’t really in any danger?

As I point out earlier, they are not in danger of disappearing but I do think their customer base will erode over time.  While they do serve rural areas that lack cable or telco-based video options, the proportion of their customer base that is in these remote areas is relatively small.  Most of their 30 million customers are in suburbs and metro areas that also have cable.

5. Plenty of my readers get their TV, and in some cases their internet, from Dish Network or DirecTV, often because they have no other option.  Should they be worried?  And if they should, what should they do?  Switch to one company over the other, or are they just doomed?

There are lots of other things that I’d worry about before this.  In the 1980s, there were some DBS failures that may have stranded some subscribers, but this is too big a business now for that to happen.  Service will still be provided, even if your bill is being paid to a different address.  Unless the other DBS operator offers something that you like better or is priced better, I don’t see a big reason to switch.  A combination of DirecTV and Dish Network would represent the single largest provider of multi-channel video services in the US, much bigger than Comcast for example.  It would still suffer a strategic technology disadvantage relative to cable and telcos, but nevertheless could remain in business for a very long time serving subscribers who particularly like its video packages, or who live in rural areas where they have no choice, or who just hate cable for some reason.

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Could we be making out our checks to DirecDish sometime in the future?  Seems like that’s a possibility.  But at the very least, even folks like Peter Shapiro believe that the current TV landscape will remain, if not static, at least vaguely recognizable for some time to come.

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