Growing satellite industry looks to cash in on growing video demand.

As cable and telecommunications companies speed up their efforts to win the digital revolution race and offer consumers 500 channels and video on demand, some videophiles are already partially getting these services with satellite dishes. The small but growing satellite industry has been a technical pioneer and is expected to become a major player in the race in 1994.

There are now about 4 million satellite dishes in America, with 1.3 million of them having the same encryption technology that the major programmers such as CNN, ESPN and Showtime are using.

Since May 1991, Burbank-based TVN Entertainment Corp. has been offering virtually video-on-demand pay-per-view movies to more than 200,000 satellite dish owners, mostly in rural America, according to TVN Chief Executive Stuart Levin. TVN's movies are available at least five months before they are shown on HBO and soon after they hit video stores.

The company was launched with a $50 million investment and hopes to double its subscriber base over the next 18 months.

Levin said the big growth spurt in the satellite market will come next year when Hughes Aircraft Co. debuts its satellite service called DirecTv.

"The 4 million dishes sold to this point came mostly from word of mouth and small local advertising," he said. DirecTv "will produce a multimillion advertising campaign and you will start to see people going to satellite stores to get educated."

Whereas TVN offers 10 movie channels at $3.99 each, Hughes plans to hit the air next April with 78 channels and by July have 60 pay-per-view movie channels, 30 cable network stations and 150 total channels. The company plans a $40 million to $50 million advertising campaign that will unfold toward the end of 1994.

Hughes will wait until its system is available nationally and the $699 worth of subscriber hardware necessary to receive the signal is available in retail stores.

The campaign will be a combination of broadcast, print and billboard advertising, preceded by a direct marketing campaign. Hughes has already established an 800 telephone number to field consumer questions. An article about DirecTv late last month in a Bay Area newspaper generated 500 calls to the service center, according to Linda Brill, spokeswoman for DirecTv.

Those wanting DirecTv must purchase $699 worth of equipment that includes a small satellite dish, a decoder box and a remote control. In the past the satellite industry has been hampered because the dishes were large and required a clear Southwest exposure. Rural homeowners have been the primary users.

Hughes critics have said equipment costs could limit DirecTv's success and make it less competitive with cable TV companies.

Brill said, "Once the cable giants upgrade their systems, consumers don't realize that they will need to buy a digital decoder that could cost between $300 and $400. People should realize when they move they don't keep their cable equipment.

"When you move with out system, you can take it with you. Consumers who want to be part of the new electronic highway will have to pay. There is no longer any free lunch."