[opendtv] News: Surmounting the High-Definition Divide

  • From: Craig Birkmaier <craig@xxxxxxxxx>
  • To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
  • Date: Thu, 2 Dec 2004 08:33:32 -0500

Surmounting the High-Definition Divide - A Wide=20
Gap Exists Between the Number of HD Set Sales and=20
HD Subscriptions

December 2, 2004 12:00am
Source: Reed Business Information. All Rights Reserved.

Multichannel News: While HDTV sets continue to=20
fly off retail store shelves, convincing=20
consumers to buy a high-definition programming=20
package remains a huge challenge for both cable=20
and satellite companies.

There are about 8 million to 9 million U.S.=20
households that have at least one HDTV set, but=20
only 2.3 million households subscribe to an HD=20
programming package from cable operators or=20
satellite providers, according to Leichtman=20
Research Group.

  Cable and satellite companies have focused much=20
of their HD marketing efforts on joint campaigns=20
with consumer-electronics companies looking to=20
push more TVs, but some analysts say more needs=20
to be done to sell programming packages to=20
consumers who already have HD equipment.

"I think the low-hanging fruit is the 6 million=20
people today, the early adopters who have an HD=20
set and are not watching HD from anybody," says=20
Leichtman Research head Bruce Leichtman. He says=20
the HD proposition offers cable and satellite=20
services an opportunity to induce customers to=20
switch to a new multichannel provider.

Educating consumers about the differences between=20
standard and high-definition TV is also key.=20
About half of the 5 million to 6 million U.S.=20
households with an HD set but without a cable or=20
satellite HD programming package think they are=20
watching HDTV, Leichtman says, citing the results=20
of a consumer survey his firm recently conducted.

"It's tragic that these phenomenally expensive=20
pieces of hardware are ending up in people's=20
living rooms, yet the reason they bought them is=20
not being realized. It's nuts," says Jimmy=20
Schaeffler, an analyst at the research and=20
consultancy firm The Carmel Group. "It's like=20
buying a luxury car because you want to go=20
faster, but they don't sell you the right gas to=20
take it any faster than 40 miles per hour."

Schaeffler believes cable and satellite firms=20
need to team up with broadcasters and=20
consumer-electronics companies to educate=20
consumers on HDTV.

  But don't expect the Consumer Electronics=20
Association to aid that cause. When recently=20
asked what the CEA was doing to help educate HDTV=20
buyers on the need for cable or satellite=20
programming packages, CEA president Gary Shapiro=20
commented that the organization believes that=20
consumers get a compelling proposition when they=20
hook up their HD sets to DVD players.

  But the Cable & Telecommunications Association=20
for Marketing is of the same mindset as=20
Schaeffler. In October, the association kicked=20
off its "Go for 2" HDTV marketing campaign=20
designed to emphasize that consumers need an HDTV=20
programming package in order to take full=20
advantage of the capabilities of their new HD=20
sets. The campaign is a joint effort with Sony=20
Corp., which markets cable as the best way to=20
watch football games in HD.

The campaign comes at a time when the gap between=20
the number of HDTV sets sold and the number of=20
consumers that subscribe to cable or=20
direct-broadcast satellite is growing, according=20
to CTAM CEO Char Beales. "We're both [cable and=20
satellite] fighting a common enemy, and that is a=20
lack of consumer knowledge about buying an HD set=20
and service as a two-step process," she says.

  But figuring out exactly how good -- or bad --=20
the HDTV situation is for multichannel platforms=20
is hardly an exact science. For example, EchoStar=20
Communications Corp. and DirecTV Inc., which are=20
both pitching consumers HDTV receivers that also=20
contain a digital video recorder, haven't=20
released HDTV subscriber numbers. And cable=20
operators are also reticent to reveal their HD=20
progress with customers.

One exception is the Rainbow DBS subsidiary of=20
Cablevision Systems Corp. The company recently=20
reported that it counted a paltry 26,000=20
customers for its Voom HDTV programming service,=20
which includes several exclusive, niche HD=20

After its October 2003 debut, Voom did not begin=20
charging customers for its programming package=20
until March 31. As a consequence, it has lost=20
2,000 customers since the end of August.

  Comcast Corp., the country's largest cable=20
operator, also doesn't release its HDTV=20
subscriber count. But Comcast CEO Brian Roberts=20
told analysts in October that Comcast systems=20
nationwide are adding about 15,000 HDTV=20
subscribers weekly. At that pace, Comcast is=20
doubling Voom's total subscriber count every two=20

Leicthman says that at this time last year, DBS=20
companies were winning a greater share of new=20
HDTV customers than their total share of the=20
multichannel video market. But he believes the=20
HDTV battle between cable and satellite is=20
"drawing a lot closer." A survey of HDTV=20
consumers Leichtman conducted this fall found=20
that 8% of cable subscribers and 8% of DBS=20
customers say they bought an HDTV programming=20

  Regardless, "it's too early to say who's winning=20
the war for HD, because I think people are still=20
lining up their armies," says Joe Rooney, senior=20
vice president of marketing for Cox=20
Communications Inc.

  Rooney maintains that cable has the advantage in=20
the HD war because operators have the ability to=20
carry every local HD broadcast signal in any=20
given market, while satellite providers don't=20
have the bandwidth capacity to do the same.=20
DirecTV Inc. hopes to eliminate that advantage=20
next year, when the company launches two=20
additional satellites that its says will allow it=20
to carry 500 local HD channels.

Of course, viewers can also receive HD signals=20
from local ABC, CBS, Fox and NBC affiliates with=20
an over-the-air antenna and receiver. But=20
analysts note that few customers own HDTV=20
broadcast receivers, which cost at least $300=20

  "Frankly, the [HD] consumer is watching regular=20
digital cable with a DVD player, and what we as=20
an industry need to do is convert those customers=20
who already have HD to our high-definition=20
service, and make sure that we win the battle of=20
the HD covert," Rooney says.

<<Multichannel News -- 11/29/04, p. 28>>

<< Copyright =A92004 Reed Business Information. All Rights Reserved. >>

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