A year after buying a $4,000 home satellite antenna to expand his TV viewing, Frank Shandra of Glendale has discovered that it will cost him hundreds of dollars more to fully exploit his investment now that two pay-TV channels have begun full-time scrambling of their satellite signals.
After years of grumbling about home satellite dish owners intercepting broadcasts that cable subscribers must pay for, Home Box Office and Cinemax--the two largest pay-cable movie and entertainment channels--on Wednesday began full-time scrambling of the signals that they bounce off orbiting communications satellites, making it impossible for home satellite dish owners to view the programs.
"I think it stinks," said Shandra, a 40-year-old equipment operator for the city of Glendale. "Something that was free, they (HBO) now want to charge $400 for a decoder and $19.95 a month for their programs."
But representatives of the $2-billion home satellite industry welcomed the announcement and predicted that it would help boost sales by erasing the confusion that has hovered over the industry for the last several years as programmers such as HBO, Cinemax, Nickelodeon, the Disney Channel and other pay channels wrestled with the problem of how to handle the interception of programming by satellite dish owners.
"We think the HBO announcement is going to have a positive effect on our sales," said Mike Brubaker, vice president of marketing at Miamisburg, Ohio-based R. L. Drake Co., one of the nation's largest manufacturers of satellite dishes. "Many consumers have been very confused about the publicity over scrambling, decoders and other things. Now that the air is clear we expect more interest from people that had postponed buying decisions."
Hamilton Ellefson, owner of Satellite Video Systems in Glendale, said the controversy has had little effect on his sales.
"Satellite dish systems are basically an upscale item, and people don't mind paying a little extra," Ellefson said. "You'd think interest would be diminishing because of the scrambling issue, but that hasn't been the case at all."
Sales of the four- to 10-foot diameter satellite ground dishes have mushroomed in recent years from more than 6,000 units in 1980 to about 500,000 last year. There are an estimated 1.3 million dishes currently in operation. The growth has been spurred by lower prices, which have fallen from about $6,000 for a complete unit in 1980 to less than $2,000 for a more sophisticated unit today.
But the sharp growth curve of the industry could begin to lose some steam in the months ahead. In addition to HBO and Cinemax, most of the other pay-television channels, plus at least two of the major networks, have indicated that they plan to start scrambling their satellite transmissions by the year-end.
Technology Critical Factor
The announced satellite subscription price of $19.95 per month to receive both HBO and Cinemax would be double the $9.95 rate typically paid by cable subscribers.
The critical factor affecting future buying decisions is scrambling technology.
Although many program services say they will rely on the same technology used by HBO and Cinemax, it remains to be seen whether satellite dish owners will ultimately have to buy a variety of expensive decoding devices from several manufacturers in order to receive transmissions from the 100-odd programmers currently utilizing communications satellites.
"What the industry expects is that, by the fall, 20 or so of the most desired channels will be scrambled," said Don Burke, vice president of sales for satellite antenna maker Channel Master of Smithfield, N.C.
"But some cable companies have taken a real negative attitude. They've been running announcements telling dish owners that in a few years (the only thing) they'll be using their dishes for is as a bird bath."
So far, Burlington, Mass.-based M/A-COM Inc. has grabbed the lion's share of the market--some 21 different cable services, according to company officials.
M/A-COM uses a digital scrambling technology that company Vice President Mark Medress calls "impenetrable. We've got enough confidence in our system that we are making 200,000 decoders."
Nevertheless, consumers with satellite dishes are already searching for alternatives to buying M/A-COM's $400 decoder and paying HBO and/or Cinemax monthly subscriber fees.
"It won't be long before you can buy a little black box that can do the same thing HBO equipment does," predicted Allan Sallade, a Whitter resident who owns a satellite dish and works at Alpha-Beta. "Anyway, there are too many other stations out there besides HBO that have good programming to worry about paying all that money to them."