BIZWATCH

By JOHN GREENWALD; VALERIE MARCHANT; STACY PERMAN; JACQUELINE SAVAIANO

SWITCHED ON

The fledgling direct-broadcast satellite (DBS) industry, which delivers hundreds of channels and digital pictures from space, used to be a mosquito on the back of the elephant cable-TV business. Now it's starting to draw blood. In what could be the next long distance-style price war, upstart EchoStar Communications of Englewood, Colorado, began offering its 18-in. dish for $199--a third of the usual price--to buyers who spend about $25 a month on programming. Market leader DirecTV, owned by General Motors' Hughes Electronics, is freezing rates until the year 2000, and will probably cut the price of its $600 dish by Labor Day.

But don't think you can easily escape the dreaded cable companies. Tele-Communications Inc., the nation's largest cable operator, and No. 2 Time Warner, among others, own Primestar Partners of Bala Cynwyd, Pennsylvania, the second largest dbs provider. TCI has begun to offer a $99 dish installation--half the usual price--to those consumers who sign up for two years.

On the horizon are MCI Communications and Rupert Murdoch's News Corp., which have sunk $1.1 billion into their joint global dbs venture, American Sky Broadcasting. This pair love a good marketing punch-up. The company started swinging last month, touting ASkyB's service as "entertainment like nothing on earth." Earth to Rupert: the system is at least two years from launch.

GRABBING CUSTOMERS

Climbing rocks, both real and ersatz, is catching on. The mainstream is jumping in because rock climbing is safer and easier in the 200 or so rock-climbing gyms that have opened nationwide. These indoor Rockies look Dali surreal. Climbers scale walls up to 70 ft. high, replete with overhangs, and dangle from ceilings made of gray granite or synthetic materials that resemble cliff faces. Color-coded hand- and footholds form routes of varying degrees of difficulty.

Industry leader Entre Prises USA Inc., a French-owned company, makes climbing walls ($60,000 for a typical 30-by-20-footer), handholds and a motorized treadmill-type wall called the Rock 'n' Roll ($12,000). The firm's business has tripled each year since 1992, to more than $15 million. Says sales and marketing director Michael Ludeman: "It's getting ballistic. We get 50 calls a day. The entire industry is going nuts." He'll just have to hang in there.

TAX FOR THE LIFT

U.S. airlines have in essence tricked passengers into subsidizing the industry's whopping 63% jump in profits for the first half of this year. The hefty $1.5 billion in earnings poured in after the budget impasse allowed a 10% sales tax on ticket prices to lapse on Jan. 1. Instead of passing on this tax break to travelers, carriers pocketed the money. This silent fare boost accounted for nearly half the increase in pretax profits that the eight largest airlines reported for the first six months, according to analyst Brian Harris of Lehman Brothers. The tax, which goes to the Aviation Trust Fund to improve airport safety and security, is expected to be reinstated this month. That leaves airlines with the choice of raising ticket prices 10%, and possibly driving customers away, or cutting prices to compensate for the tax. Some carriers, worried about filling seats in the normally slower autumn months, have begun discounting. A new round of air wars? Probably not, but the industry's profits could be falling with the leaves.

--By John Greenwald, Valerie Marchant, Stacy Perman and Jacqueline Savaiano