VideoCipher, Scrambling Device Maker, Opens San Marcos Retail Store : Electronics: Manufacturer hopes to cash in on new technology expected to increase sales of home satellite dishes and descramblers this decade.

Executives at VideoCipher, which manufactures scrambling and descrambling technology that is used in the satellite television broadcast industry, firmly believe that technological advances eventually will make home satellite dish systems as appealing to consumers as microwaves and VCRs.

That belief is driven by the development of new satellites and transmission devices that, during the coming decade, will allow homeowners to use relatively small signal-receiving dishes instead of the current generation of dishes that take of up space and, all too often, make neighbors see red.

The bulky nature of dishes--the current generation are between 7 and 10 feet in diameter--has kept satellite systems from gaining a mainstream following, in large because many communities have ordinances that prohibit them.

But the new satellites, which are as small as 2 feet in diameter, could defuse public concern and turn satellite systems into a mainstream product, said Stewart Schley, editor of Denver-based Cable World magazine.

To prepare for the expected sales explosion, VideoCipher, which also sells signal receivers, scramblers and descramblers to wholesalers, has taken the unusual step of opening Satellite Sensations, a retail store in San Marcos.

VideoCipher, a division of New York-based General Instrument, decided to open Satellite Sensations because “in consumer electronics, nothing beats seeing that glint in the consumer’s eye when (a customer is) listening to a presentation,” said Greg Gudorf, who joined VideoCipher this summer as director of retail operations.

Before opening the company store, VideoCipher’s knowledge of consumers’ reactions was limited to what could be gleaned through conversations with satellite system retailers around the country, Gudorf said. VideoCipher’s store is probably an industry first, observers said, because sales traditionally have been handled by electronic companies--many which lack sophisticated marketing and sales programs--that install the devices.

VideoCipher will use sales and marketing information generated by the store, which will offer products manufactured by VideoCipher and its competitors, to improve its own line of products, Gudorf said. VideoCipher personnel who operate the store will pay close attention to how customers respond to the best--and worst--features of products made by VideoCipher and its competitors.

But the company also intends to make marketing information available to its dealers around the country in an attempt to bolster the sales of VideoCipher products.

Although the name suggests a concentration of satellite-industry-related electronics, Satellite Sensations also offers a wide variety of home-electronics devices, including both audio and video technology.

The store, which includes a play area for children, is designed “to make it appealing to the whole family, because that’s who we’re after,” said Charles Dunham, a consultant who helped design the store. The play area was added because it takes about 30 minutes to explain satellite broadcasting to a typical consumer, said Dunham, the brother of VideoCipher’s president, Lawrence Dunham.

Although it is uncertain when the new technologies will take hold--industry estimates range from 5 to 10 years--at least three direct-broadcast companies already have unveiled systems that will utilize the new satellites and receiving dishes.

Kent, Wash.-based SkyPix, for example, hopes to use the new-generation equipment on a broad basis when it beams signals to residents of select cities during early 1991, according to SkyPix spokesman Harvey Bolgla.

VideoCipher has a decided interest in how the satellite industry matures because, as new companies begin to beam signals, they will use scrambling systems that will force consumers to buy a descrambler.

Now, a handful of companies, including VideoCipher and Toshiba, manufacture receiving and descrambling systems, Gudorf said. However, the other manufacturers are dependent upon a proprietary descrambling technology developed by VideoCipher, Gudorf said.

But VideoCipher’s dominance in the scrambling-descrambling industry could be threatened, observers said, because, as the new programming services spring up, VideoCipher will be competing with other manufacturers. Scientific Atlanta, a VideoCipher competitor, recently won a contract to scramble and descramble signals for KPrime, a satellite service that will begin operation in a handful of locations Nov. 1.

Gudorf said the store is, in part, an attempt to learn what fears exist in the minds of consumers, many of whom were frightened away from direct satellite broadcast in the mid-1980s when programming companies such as HBO and Cinemax scrambled their signals. Although an estimated 700,000 satellite systems were sold in 1985, “things cooled off substantially” in 1986, Gudorf said.

Annual sales in the satellite-system industry hit 350,000 during 1989, and about 3 million systems are now in operation, according to Linda Brill, public relations manager of the Satellite Broadcasting & Communications Assn., a Washington-based trade group.

“With the new dishes, you won’t have zoning problems, you won’t have these . . . eyesores,” Brill said. “With the 20-inch dishes, you can stick them on your window or on the roof and nobody will know that they’re there.”