Three Steps To Make Digital TV Profitable . . . Finally

[Gregg Lengling]

Forrester Research Offers Helpful Tips
 
 
  CAMBRIDGE, Mass., Mar. 10, 2003 -- Why is the federally mandated transition to digital television moving so slowly? Because except for the companies that make TVs, digital TV is a profitless exercise for the television industry.

Most broadcasters, cable companies, and networks deliver digital TV to please regulators, not to make money. High-definition TV (HDTV) content will continue to lag until a viable revenue stream emerges. Forrester Research, Inc. suggests three imperatives that will make HDTV profitable and speed the digital TV transition.

Today's HDTV reality:
The major networks show spotty commitment to HDTV, because it brings in little revenue. More than 500 broadcasters have yet to complete the mandated conversion, and only six percent of HDTV owners can receive over-the-air digital broadcasts. Cable operators cannot carry many HDTV channels, because each one consumes four times the bandwidth of a standard digital channel. And, while consumers know about HDTV, only three percent own one.

Imperative #1: Cable operators should charge more for HDTV.
While FCC rules mandating the end of analog TV will drive digital sets into more than half of homes, less than 16 percent of households -- those with big-screen HDTVs -- will pay for the service in the next five years. Forrester found that this elite group, as well as those consumers who are "likely to buy," will gladly pay $10 per month for the service.

Imperative #2: Operators should pay networks for HDTV programming.
To charge $10 per month, operators need to demonstrate value by including local channels -- not just Discovery, ESPN, and HBO. Top-rated HDTV programs are all on local channels. By breaking precedent and paying for these local channels, cable operators will encourage them to produce more HDTV content.

Imperative #3: Regulators should accept this arrangement instead of fighting it.
Why not let affluent HDTV owners subsidize the digital TV transition with cable payments? Putting profit into the digital transition makes public policy sense. It will boost HDTV content and speed up the government's ability to sell off the spectrum used by analog TV. And, by bringing $300 million in profits to cable, it will stop cable bills from heading through the roof.