Power 50; Entertainment & Media: Moguls Emerge From DBS, Online Services; Net Distribution's Power Players

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Technology has created not only new forms of entertainment but new, popular forms of entertainment distribution.

Thanks to the emergence of direct broadcast satellite and online services, consumers have more media-delivery and content options than ever before.

The leaders of these businesses have grown in part through megadollar marketing programs to educate the public about these technologies' abilities-and plant their brand names in the product lexicon of Americans.

COMPETING SATTELITE SERVICES

Nowhere is this more apparent than in the DBS business, featuring market leader DirecTV and No. 2 player Primestar Partners. The former claims about 1.8 million of the nation's 3.4 million subscribers; the latter, approximately 1.4 million.

To win the hearts and viewing habits of subscribers, both marketers are spending big-in excess of a combined $300 million this year-to define who they are and how they differ from one another.

Setting the agenda for DirecTV and its $150 million ad budget is Exec VP Jim Ramo. Those dollars will not only be spent on acquiring new subs, but in burnishing DirecTV's image as the industry leader.

Combined with its complementary service, USSB, DirecTV offers about 200 channels, vs. less than 100 for Primestar. And it attracts a more affluent customer base than its rival.

"I think [DirecTV] has become the dominant player in the category pretty darned well," says Stephen Blum, president of DBS consultancy Carmel Group. "There are other guys out there, but DirecTV is the big dog."

Last spring, Mr. Ramo got a boost when AT&T Corp. began promoting DirecTV through the phone giant's telemarketing pro-Technology creates new media moguls

gram. Among other incentives, AT&T customers can sign up for satellite service with 0% financing. Support like that counts for a lot, considering AT&T boasts about 90 million customer contacts.

"AT&T is very good at selling telecommunications services, which will help DirecTV enormously," Mr. Blum says.

This year, DirecTV began a serious effort against cable TV, particularly in cities and suburbs. Mr. Blum says DirecTV is better suited than Primestar to going after cable customers because its dish is smaller, which helps those in populated areas, and because Prime-star has links to the cable business.

NO IGNORING PRIMESTAR

If DirecTV is sizing up its wired competition, it surely is not ignoring Primestar.

In 1996, Denny Wilkinson, Primestar's senior VP-marketing & programming, will spend at least as much as DirecTV-probably close to $170 million-to tout the service's family-oriented image in ads from Adler Boschetto Peebles, New York.

"We introduced our advertising approach in the last Super Bowl by running seven new commercials that reached out to everybody in the family-children, teens, sports fans, movie fans," Mr. Wilkinson says.

But no matter who makes the purchasing decision in households, Mr. Wilkinson believes Primestar owns one key marketing advantage: Primestar customers can lease the dish for about $33 a month, while DirecTV subscribers must buy the equipment up front.

PRICE WAR HITS

Indeed, the price differential between the two companies and other new upstarts in the business has triggered a price war. DirecTV has lowered its base package price to the $200 range.

Despite adding 50 chnnels next year, Primestar's base price will remain the same, according to Mr. Wilkinson.

"Our strategy has always been to keep things simple," he says. "We're going to make our money if we keep our customers happy."

That's a mantra followed by Ted Leonsis, a pioneer in another alternate medium-online services-and the creator of the term "new media."

"If there's one thing I've always told myself, it's `defy conventional wisdom,'*" says Mr. Leonsis, president of America Online, the nation's leading online service.

Mr. Leonsis is managing an ongoing marketing push to keep AOL ahead of second-runner CompuServe, which has less than 4 million subscribers to AOL's current 6 million, and to brand the company not just as an online service but as a full entertainment media company.

$333 MILLION IN MARKETING

In 1996, the service will maintain marketing momemtum with TV branding, breaking this month from TBWA Chiat/Day, New York, to continue bringing new users on board. It will also use direct efforts to retain current customers, like a video mailing to teach users about the new software edition's features.

And with a $333 million marketing budget for 1996-'97, which will fund ad campaigns, AOL's spigot is sure to spew forth.

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