PrimeStar Shuts Down September 30th

When the lights go out at PrimeStar on Saturday Sept.30th, the
satellite industry will close a chapter on a
nine-year-old business that had its ups and downs.

On Sept. 8, DirecTV revealed that it will shut
down the medium-power offering at the end of the
month.

The service, bought from its cable partners by
DirecTV and Hughes Electronics early last year, began
in 1991 as an effort to get multichannel programming
into rural and unserved households. When it saw
the small dish threat posed by DirecTV and then-partner
U.S. Satellite Broadcasting in 1994, the service went
digital and became cable’s first weapon against DBS.

The medium-power offering - which had backing from
Tele-Communications Inc., Time Warner, Comcast and
other cable giants - managed to attract more than
2 million subscribers after it went digital in October
1994. PrimeStar was also well known for its strong
advertising presence and marketing savvy.

However, constant in-fighting among its cable
partners, heavy churn and a dish that was much bigger
than the small dishes offered by DirecTV and
EchoStar’s DISH Network helped turn the tide against
the service. PrimeStar’s 160-channel slate also
couldn’t keep up with DBS offerings that had 200
channels … and their eye on as many as 500 channels.

More troubles surfaced when the company began chasing
high-power spectrum. Some say PrimeStar put too
much emphasis into that effort.

The first nail put in PrimeStar’s coffin came in
1998, when anti-trust regulators - concerned about
the company’s cable backing - threatened to stop
PrimeStar’s acquisition of high-power DBS assets
controlled by News Corp. and MCI. PrimeStar abandoned
the deal, and the News Corp./MCI assets, which
existed under their failed American Sky Broadcasting
venture, ended up in the hands of EchoStar.

Shortly thereafter, DirecTV agreed to acquire
PrimeStar under a two-part deal worth $1.83 billion.
The proposal included high-power TEMPO satellites
and spectrum at 119 degrees.

Around the same time, DirecTV bought out USSB.

As of June, DirecTV reported that PrimeStar had
435,000 remaining customers. DirecTV said it expects
to switch more PrimeStar subscribers to its small
dish service once PrimeStar goes dark.