Digital Upstart
Antenna? Yeah, it's retro in concept but not in execution, says Gerry Kaufhold, an analyst at market researcher InStat. USDTV has been quick to adopt new antennas and the chips inside set-top boxes, which together help it reach more homes than typical broadcast signals. That's crucial, because the business depends on good reception from multiple towers. "They've been gutsy getting out there with this concept," says Kaufhold, who likes USDTV's chances.
Others aren't so sure a new delivery system can make money at $20 a month. Station operators at Gray Television and Nexstar Broadcasting knocked USDTV's plans in a recent meeting with analysts, saying USDTV spent too much to get customers.
USDTV counters that it doesn't cost much to get started in a new market--perhaps $100,000 to add broadcasting gear. The boxes themselves sell for $25 at stores, most notably Wal-Mart, and come with professional installation. Still, the service has rolled into only four markets, with the largest being Dallas. It's a far cry from the 30-market, nationwide rollout that Lindsley predicted for 2004. But last fall, USDTV raised about $25 million in expansion money from six station operators, mostly smaller outfits that might feel threatened by the conversion to digital broadcasting. Large media operators might better exploit new opportunities in digital broadcasting, by developing or buying new programming, said Tuna Amobi, an equity analyst with Standard & Poor's, in a recent report to investors.
Lindsley seems to relish aligning himself with Davids against the media Goliaths, drawing the inevitable analogy to Southwest Airlines and how its low-cost service tapped markets underserved by major airlines. Similarly, the big cable and satellite operators neglect those who don't want high bills, or spicy content, Lindsley says. "Parents feel overwhelmed trying to manage the media coming into homes."
His Mormon upbringing jibes with the sales formula, which doesn't make room for HBO and other sometimes raw channels, says Lindsley, who once ran the Salt Lake City station owned by the Church of Jesus Christ of Latter-day Saints. And he has known adversity before--as BYU's starting quarterback in 1986, he was booed after the once dominant program stumbled. "That," he says, "was great preparation for competing with cable."
AT A GLANCE
U.S. Digital Television leases spectrum from TV stations in a metropolitan area to deliver an average of 30 broadcast and cable channels.
Founded: 2003
CEO: Steve Lindsley
Cost: $25 for a starter kit, $20 for basic service, $7 to add Starz channels
Current markets: Albuquerque, N.M.; Dallas; Las Vegas; Salt Lake City. Announced: Norfolk, Va.
Employees: 109
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