Last month, Forrester Research issued the report, “Unlocking Profits from Digital Television,” teasing it with the email subject line, “3 Steps to Make Digital TV Profitable...Finally.”
The report offers three imperatives that Forrester researcher Josh Bernoff believes will bring profitability to the industry:
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% 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.
Two other suggestions were also given in the report: Satellite should offer HDTV service in five local markets and cable operators should offer coupons to drive TV sales.
Let’s forget about everything except the $10 a month for HDTV via cable. I have a problem with this—the main point about the transition to digital is that it is supposedly a free, over-the-air thing. I also have a problem with the cable companies paying the broadcasters for their HD signal.
Let’s say the ten bucks gets split between the stations and the cable company—basically a buck a station for five stations. Figure out how many subs the cable company might have that are HD-ready and multiply by $12 for the annual figure per station.
Using West Palm Beach, FL (DMA 39) there are 700,850 TV households, according to Nielsen Media Research. Let’s say that at some point, 5% will have HD-ready sets (I’ll assume that if you buy an HD-ready set, you’ve probably got cable). Total annual revenue: $420,516 for each station (based on $1 each per month) and $2.1 million for the cable company (based on $5 per month). Not bad. Figure in a little annual HD-ready growth and your $2 million conversion is paid for in a little more than four years. Nice. Maybe put some of that money toward local HD production. Nicer.
What’s Wrong With This Picture?
A lot. Or so I thought. When I first read the report, my initial reaction was that this was so wrong. But I could not figure out why. I get HD over the air with a silver sensor antenna. Would I rather have the signal via cable without reception problems? Of course. I think my reaction was that this was supposed to be free HDTV. That’s what makes HDTV so cool—it’s free. And cable paying for broadcast signals? Come on, give me a break.
Then I thought—well, there’s basic broadcast on cable for about $15 a month, so $10 for all my local channels in HD isn’t so bad. Of course if the station multicasts, I want all of those channels as well (one local station in South Florida, WPEC, uses 12-1 for HD and 12-2 for low-bit-rate weather radar, live shots, and seven-day forecasts). I figure that my ten bucks is paying for the bandwidth to carry the 6MHz signal, regardless of what is in that bandwidth.
Of course, it really isn’t just $10. I’m sure I’ll need the highest level of digital tier service, and the cable company’s set-top box rental fee, so this $10 “upgrade” will really cost much more than the non-digital cable service that I currently have.
That said...where do I sign?
Michael Silbergleid is the editor. He can be reached at:
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