DTV’s Future In The Hands Of Consumers

Look out Las Vegas. Here comes 100,000-plus people ready to descend on the 2004 Consumer Electronic Show (CES). With a huge chunk of the excitement surrounding new DTV and HDTV offerings.
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Look out Las Vegas. Here comes 100,000-plus people ready to descend on the 2004 Consumer Electronic Show (CES). With a huge chunk of the excitement surrounding new DTV and HDTV offerings.

Says Consumer Electronics Association president Gary Shapiro, “You’re going to see a tremendous array of different types of HDTV products at this show. There will be quite a lot of cable-compatible products introduced. You’ll see LCDs now becoming a serious television product. Flat panel plasma sets are getting less expensive and better. And then you get the DLP product, which is also getting much better and less expensive. There’s a battle underway between these different types of products and with the variety of other displays in the mix—including rear projection and direct view—it’s safe to say that DTV will be pretty huge in 2004.”

That sound you may be hearing as 2003 ends is the collective exhaling of a lot of people who were still concerned about the DTV transition stalling out. Even though most American consumers are still analog, there has been enough pronounced movement in 2003 regarding content creation, distribution and (especially this past fall) consumer purchases to allay most of the vestiges of anxiety that prevailed this time last year. And, the recent flurry of legislation—the plug and play requirement in September and the decision about broadcast flags in November—has answered a lot of other serious concerns.

HD For The Masses

While DTVs only accounted for 12% of unit volume of televisions purchased last year, that number already exceeds the analog dollars spent on sets (one advantage of costing a lot more). If the momentum keeps up, 2004 should be a very important year in this transition. Reports of HD sightings at Wal-Mart and other lower-end retailers demonstrate to many the growing interest even on the part of Mr. and Mrs. Six-pack in upgrading their television. People are noticing some HD models (display-only of course) at the discount clubs for under $800, and even the much higher-end products are moving off showroom floors into people’s homes faster than ever. At Thanksgiving time, TiVo users found a seven-minute infomercial on their PVRs from Pioneer on how to chose a plasma HD display, even though HD TiVo units won’t be available until 2004.

An unofficial survey by this author found that the term most frequently used to describe the state of the DTV rollout right now is “tipping point.” There’s no turning back now. You can feel the inevitability in the air.

“I think 2003 was a bigger explosion than anyone predicted,” said Shapiro. “Our original estimate last year said that 4 million units would sell. We were accused of being Pollyannaish. I don’t know anyone who said sales would be higher than we did and we were under. By midsummer we had to bump that up to 4.3 million. In September alone half a million units were sold. There’s no precedent in history for a product that costs on average more than $1,000 selling half a million units in a month. 2003 was a banner year and in 2004 we expect the number to be 5.8 million.”

Watching HD

Of course, the amount of DTV and HD programming actually available has to keep growing if consumer interest is going to expand (2004 by the way is also the year, we hope, for a moratorium on the chicken/egg analogy for all discussions on this topic). From the standpoint of broadcast television stations, the NAB reports that of the 1,600 commercial and PBS stations, the number that currently converted is very close to 1,100.

Some might say that at six months past the deadline for complete conversion, that’s not so great, but NAB president of corporate communications Dennis Wharton begs to differ. “In just 18 months,” he said, “we’ve gone from 200 to over 1,000 stations on the air in DTV. On January 27, 2003 there were 700 stations on. So we added close to 400 stations this year.”

The ones that aren’t converted, he added, “are primarily in small markets where the burden is considerably greater in terms of the financial impact. It’s not a minor expense for a small-market television station to make the transition to digital. In some cases the cost of converting to DTV is as much, if not more, than the net profit margin of the station on an annual basis. In really small markets, the cost can be as much as the value of the property itself. That’s why we’ve encouraged the FCC to the financial burden issue and giving stations a little extra time and they have been responsive.”

CBS has been out front with digital content from the start. Robert Seidel, vice president of engineering and advanced technology at the network would like to see all 1,600 stations converted, though he realizes that a handful of stations have been held up for perfectly logically reasons having to do with zoning and local legal issues. But, he said, “The FCC is taking a get-tough policy with stations who are just photocopying last year’s excuses and threatening to fine them or revoke their licenses. I think we’re going to see some of them [converting] this year.”

Seidel reports that his network now has 153 stations on the air in DTV, covering about 93% of U.S. households. “Of that,” he said, “I think all but 12 in some of the small markets are HD.”

CBS currently offers 100% of dramas and comedies in HD, as well as a lot of sports (ABC has announced that it will be at that level in time for the next fall season with the other networks closing the gap quickly). “News programs are not converted,” Seidel explains, “because we have worldwide news gathering organizations and that’s a massive job. But we’re doing Saturday college football, Sunday NFL, The Young and the Restless, and US Open Tennis. More sports than ever, including Super Bowl XXXVIII. All 1080i.”

PB$

PBS is also stepping up its role in the transition. André Mendes, chief technology integration officer, reports that 220 member stations have transmitters on the air, covering 80% of the U.S. For the local PBS stations to make the migration, he said, the money has to come in from local campaigns and some state and federal migration funds.

“We’re working with them as fast as we can to get everybody into compliance,” Mendes said, “but there are fiscal realities we’re dealing with. We help the member stations a lot with engineering and contract negotiation with DTV vendors. But sometimes you run into the issue called not-enough-cash. We haven’t found the solution for that.”

As for content, PBS has been slower than many of the commercial networks to ramp up. Of course, they were something of a trailblazer at the beginning. It wasn’t that long ago that some frustrated consumers would hook up their brand-new HDTV to find that the loop of pretty Taj Mahal shots on PBS, which had so impressed them in the showroom, was actually the only HD programming out there. But those days are over and PBS has fallen behind.

PBS, Mendes said, is working to change that. It plans to increase to about 400 hours of HD programming a year in 2004 as well as to create some original content and migrate some ongoing shows to HD. Specifics are to be announced.

Mendes confesses that his personal views diverge somewhat from the PBS line. “The official position,” he said, “is proceed with caution because of the number of sets out there. But I own one of them and my opinion has been that this is going to accelerate dramatically once a certain price point is reached, and I believe we’re very close to that price point already. I think that when the difference between a high-quality analog TV and an HDTV is only a few hundred dollars, a lot of people are going to make that leap.”

Of course, there are still a lot of issues that can dampen most people’s enthusiasm, not the least of which is the question of how much of this glorious content, broadcast in HD, will actually reach the considerable majority of households that rely entirely on cable for their signal.

But for many on the CES show floor, at least for a few moments, these concerns will likely melt away and the biggest worry will be, “How will I get that big, beautiful thing in my front door?”