Commentary: A wake-up call from EchoStar

By Josh Bernoff, Principal Analyst

Samsung recently announced a $499 100-hour digital video recorder, which takes its place alongside other lower-capacity DirecTV DVR set-top boxes from Hughes Electronics, Sony and Philips. But the real action in this market is coming from satellite price leader EchoStar Communications.

EchoStar last week announced its own 100-hour product, the Dish Player DVR 510. For new subscribers to EchoStar's Dish Network, it comes with an attractive price: free. EchoStar will be promoting it with spreads in major papers and TV ads, touting its price advantage over TiVo. According to Forrester's consumer surveys, DVR features top off consumers' TV wish lists--half of all consumers say they want to skip commercials easily, and nearly as many want to pause live TV and record all episodes of a given show. Now competitors must respond.

DirecTV needs to match EchoStar's offer. Satellite needs DVR subscribers, as they're only half as likely to switch back to cable. Both DirecTV and EchoStar now charge an extra monthly fee for most DVR subscribers, but DirecTV is still charging $199 for its box. Even $99, the price DirecTV promoted last year, looks pretty high compared to EchoStar's free box.

As for cable, it needs sharper marketing and DVR set-top boxes now. EchoStar describes its DVR as "Dish Video On-Demand Service"--a pitch that will bollix up cable operators' marketing of head-end-based video

		Related story Samsung unveils digital video recorder The electronics giant's first DVR, designed to work with DirecTV and TiVo services, can record 100 hours of programming.

As the trend picks up speed, advertisers and networks must begin to monitor DVR viewing. By the end of this year, EchoStar's promotion will help push DVR households from the current 2 million to more than 3 million. And for the first time, EchoStar will specifically promote the Dish Player's 30-second ad-skipping feature. Advertisers and networks should sign up for TiVo's "Commercial Viewing Report" to better learn how to craft skip-resistant spots in network programs.

As DVRs spread, TV is changing rapidly to an on-demand medium. The industry needs to pay attention--and EchoStar's free DVR is the wake-up call.

© 2003, Forrester Research, Inc. All rights reserved. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.