DirecTV and Echostar have nearly 30 million subscribers in the U.S. between them. While they continue to trail established cable competitors in total subscribers, the two satellite operators also must now focus on the growing competitive threat from telcos such as Verizon.

To remain competitive in the pay-TV landscape, both operators are looking at improving the interactive elements of their services. Eric Shanks, executive vice president of DirecTV Entertainment told Satellite News that the operator had "now got[ten] over the technical challenges" and that the challenge was now to come up with winning applications. A new games feature is indicative of DirecTV’s latest approach.

"We are launching a game service in October called the DirecTV Game Lounge," Shanks said. "A lot of platforms allow you to play video games with your remote control. This will not be too unlike any of those, except we throw in a few twists. With our games, you can watch TV while you play. As far as I know, we would be the only ones allowing you do that. Actually, that is not the case. In the U.K., there are some games provided directly by the programmer like Discovery, so you can play Discovery games while you watch Discovery. With ours, you will be able to watch any number of channels while you are playing Sudoko. You will also be able to challenge other DirecTV subscribers to games."

Scott Higgins, director of interactive programming at Echostar, believes it has now reached the time where the operator is looking at the quantity of interactive TV offerings as well as quantity. "I think doing more, is not necessarily doing better," he said. "I think doing better products is what we are after now. I think interactive content, whether it is IPTV or on-demand, is an important strategy for us. We are trying to create added value to the subscriber. We look at interactivity, and whether it is from the hard drive or the IPTV port or satellite, we feel if we can offer all of that. It is a competitive advantage that we have against everyone in the U.S. market. Where the content comes from is not important for the viewer. What is important is getting the added value content they cannot get just from the linear feed."

DirecTV and Echostar are in the early stages of their interactive strategies, and both operators are on a learning curve when it comes to consumer reaction. Shanks believes DirecTV’s interactive service has been "shockingly successful" throughout the last 12 months.

"For consumers who really were only introduced to interactive TV a little over a year ago, the usage statistics are high," Shanks said. "For example, nearly 40 percent of all NFL subscribers use the interactivity and of those 40 percent, 65 to 70 percent use the application more than five times in a day. For the NCAA basketball tournament, it was two- thirds usage. It is amazingly high. Obviously, there is a novelty to these things. But, we are still continuing to see very high repeat usage across all of these applications. It has surprised us. You go into it thinking that 15 percent usage is a success. We are doubling and tripling that in some instances."

Interactive Offerings

Both operators are also optimistic that interactive advertising will begin to have a strong impact in the United States. Higgins believes early signs have been encouraging.

"The advertisers we work with have been very accommodating," Higgins said. "We have seen a growth in repeat customers, so those that have viewed the service must be happy as they are coming back. I think so far we have run about 35 campaigns this year, which is up significantly from the prior year. We see repeat buys from advertisers so they must be satisfied with the results, so that is promising for us. As each month goes by, we are seeing more advertisers leveraging their short form video advertisements with interactive content," he said.

"We are running a number of interactive advertising campaigns in any given month," Shanks said. "Automotive is a really strong category for us. We have been dealing with Dodge and Chrysler for six months now running interactive applications. Interactive advertising is still growing. It has not matured to the point where I would say it is adding a lot to the bottom line, but it will. Having the interactive advertising capability brings in a lot of traditional business as well. It helps the bottom line that way."

Both operators also are looking to be innovative in terms of sports coverage, which lends itself to interactivity naturally.

DirecTV has put together a deal with the New York Yankees that provides certain interactive capabilities, Shanks said. "The thing that makes this application fairly unique in the U.S. is that we have a DirecTV dedicated camera in Yankee stadium that covers the game for us for bonus cam," he said. "It has got a lot of attention. We have launched this recently. We will start to see how well people like it from the user space."

If the service is successful, it could expand very quickly. "We would look to expand it to other teams and other regional sports networks," Shanks said. "There are rights issues, so that is why we are only doing it with one team this year. It is a three-way arrangement between [Major League Baseball], Advanced Media and the YES network (the Yankees TV network). Hopefully, this will end up being a good experience for everyone, and we can set a precedent for how platforms and channels and teams all deal with these interactive TV rights."

Echostar has also looked to work with video providers to bring strong interactive sports coverage. "You have major events so we try to use those to bring in multi-camera or multi-video feeds," Higgins said. "We put those into the Dish home to showcase interactivity. Our strategy has been to get a major sports event, or another event, at least once a quarter to showcase in our mosaic. We dovetail off of that for individual sport categories. We hope to have interactive features on all the major sports."

Both operators are looking at broadband as a way of boosting their interactive offering, with issues such as personalization and localization being key.

"I think what we are looking forward to now is how we enhance that offering even more with the advent of the ability to use IPTV content with our iTV services," Higgins said. "That is where we are going. With a linear content offering, if you have a box which has IPTV access you can get interactive content coming down via satellite. It could be coming off the hard drive. It could be coming off the IPTV port where you get even more personalization of the linear feed.

"For example, you could envision a news service which is offering content and you can even take things off the hard drive and integrate it with the interactive part of the linear feed," he said. "On the hard drive, you can have the content which is pushed down from the satellite. You also have the content from the IPTV link, which gives you more personalization and localization. The bandwidth restraints from satellite are eased by using the Ethernet port, where you can bring in that broadband content."

DirecTV is also planning some aggressive broadband launches throughout the next year. "We will launch our broadband, video-on-demand service and will also have broadband connectivity in the box to get even more two-way rich interactivity," Shanks said. "You will also be able to use your mobile phone to program your DVR (digital video recorder). We will be doing that with our DVRs in the first quarter of next year."

The Next 12 Months

Both Shanks and Higgins believe interactivity will only increase in importance over the next 12 months. And other operators will try and play catch-up with satellite, Higgins said.

"I think the biggest change is the number of rollouts other operators are doing," Higgins said. "There is probably going to be a tremendous amount of new content. It will either be new channels or enhancing existing linear services with interactive features. We are seeing more and more of it each week from other operators. We think the satellite players have an advantage here, but the cable guys are smart, so I am sure they will catch up," he said.

"By next year, we will have been doing this for three years to the entire country," Shanks said. "In 12 months, I would like to be able to say that we are seeing interactivity, broadband, on-demand having a recognizably positive effect on some of our key metrics. Can you prove that interactivity is helping to reduce churn? Are the revenue- generating interactive capabilities actually generating revenues? Are we continuing to increase our interactive advertising capability? By next year, I think we will be able to see the impact it is having on key metrics."

–Mark Holmes

Contact, Darris Gringeri, DirecTV, e-mail, [email protected] Kevin Hubbard, Echostar, e-mail, [email protected]