The recent closure of two of Germany’s HDTV channels has “cast a shadow” over European hopes for rapid adoption of HDTV, according to a study by the Broadband Network Strategies service, part of Strategy Analytics, a Boston-based research firm with offices in Europe and Asia.

The report, “HDTV Channels Shut Down: A Sign of Things to Come?” says Europe’s TV providers should concentrate their resources initially on building pay television rather than advertising-based models in order to reach the critical mass of HD content and receivers necessary to make HDTV a self-sustaining business.

ProSiebenSat1, a leading German commercial broadcaster shut off its two HDTV channels Feb. 15 due to low audience figures. Now, only a handful of HDTV channels remain in Germany, most of them pay systems, according to Strategy Analytics.

“It was always highly ambitious to expect advertising revenues alone to support HD channels in the early years,” said Principal Analyst David Mercer. “Significant audiences cannot be built until the market has been seeded with millions of HD receivers—and this was always going to take a number of years.”

According to the report, only 5 percent of Europeans who own HDTV sets are actually watching HD channels. The report predicts the number of HD subscribers across Europe will grow to 3.5 million by the end of 2008, and 20 percent of all European households will have HD by 2012.