Satellite ‘Rentals’: Big Plans, Many Questions : An Analysis

There was a lot of media hoopla last week about a plan that will enable owners of home-satellite dishes to “rent” videos without going to the video store.

Well, maybe not a lot of hoopla compared to something like the did-Dan Quayle-dodge-the-draft issue, but good news--or any news--about the beleaguered home-satellite industry is rare these days, and very welcome in the 2 million homes with one of those dishes sitting in the back yard. On both the manufacturing and receiving ends, satellite people have had more to cry about than crow about lately: Namely, a monster called scrambling.

It’s no coincidence that the need for $400 decoders for satellite systems began in January 1986, and sales of those systems fell from 625,000 in 1985 to 230,000 in 1986.

The announcement last week by the Santa Monica-based Touchtone Video Network (TVN) of an “electronic Videocassette Rental System” certainly seemed like the first bright light to come along in the area in three years, but was it as “revolutionary” as the company claimed?

Hans Giner, president of the American Home Satellite Assn., a Bellevue, Wash.-based consumer-support group, is among those who are wondering.

Contacted at the SBCA/STTI Satellite Show in Nashville this week--the industry’s biggest annual get-together--Giner was hopeful but a little skeptical on the matter of whether the Touchtone announcement really was a big deal.

“There are already a number of other subscription services that offer movies to satellite-dish owners,” Giner pointed out, a fact that far too many of the press reports about Touchtone left out entirely. “And some of those services (such as Viewers’ Choice and First Run) make films available at about the same time they’re available on a pay-per-view basis to cable subscribers.”

However, there are some new and significant features about TVN. Asked what makes Touchtone different from presently available satellite-movie services, TVN President Stuart Z. Levin told The Times: “Our system is totally consumer-driven. Those other services might run 10 or more movies, but they do it on one or two channels at the most. We’ll have 10 movies on 10 different channels.”

The other unique feature of the TVN system, Levin said, is the speed--a matter of seconds, he said--between choice of movie and the moment it appears on the TV screen. “The user simply calls an 800 number for the movie he wants--the last number will be different for each film--and that’s it.”

Speed-crazy, movie-crazy dish-owners will pay for their film fixes, of course. Even if they already have a decoder box, they’ll have to get another from TVN. The company won’t charge them for it but will charge a monthly fee of “about $25 to $30,” according to Levin, plus “about $4” per movie.

That’s about double the average video-store rental cost. And it’s not the only disadvantage to TVN: There’s no copying the film for later viewing (there’s a built-in Macrovision-like bug), and thus no stopping it for a trip to the kitchen or elsewhere. And compared to the hundreds or thousands of tapes to be chosen from at a video store, TVN will offer only those 10 films at any given time.

But the TVN system has additional advantages, said Levin--among them, a descrambling system that’s faster than the currently dominant Videocipher system, and compatibility with high-definition TV technology.

Convenience is Touchtone’s top selling point. But will it be more important than variety to dish owners? Will significant numbers of them be willing to pay those extra charges rather than go to a video store?

Giner isn’t so sure. “It’s too early to say what the response is going to be,” he believes.

Asked about whether rights to films had been secured from home-video companies, Levin told The Times, “We’ve spoken to all of the major suppliers and they’ve all been very interested.” And even though he could not point now to any solid deals, he asserted there would be “no problem” in this area.

The other big question concerns the range of services. Besides its 10 movie channels--to be carried by transponders on AT&T;’s Telstar 303 satellite--TVN will offer up to seven other channels, according to Levin. Six will be “basic” services--”sports, news and so on,” as Levin described them, though he could not yet say whether that would mean biggies like CNN and ESPN or littlees like FNN.

The other channel will be devoted to the Starion Entertainment Network--a joint venture between TVN and Amway--yet another subscription service that will “provide top movies, children’s programming and special events,” according to a press release.

That press release also has Levin talking about a “new ‘golden age’ of Home Video Entertainment” in which “by the early 1990s, people will be buying satellite television reception panels compact enough to fit inside even small apartments.”

Maybe so. Levin’s definitely seemed right when he told The Times, “Consumers will drift to whatever’s best for their dollar.” And Giner, however skeptical he may be about TVN’s plans, added: “Any service that adds more choice is welcome, and will have some effect on sales of satellite equipment.”