I have a vested interested in seeing HDTV take off.Every new HDTV set sold is another reason for someone to
subscribe to HDNet and HDNet Movies.But sales of HDTVs don’t really need much
help. They are flying off the shelves. The CEA says that digital TVs account for
more than 25 pct of TVs sold this year and that percentage is
growing.
Some are even predicting that digital will outsell analog in 2005!As prices decline further and
further, analog TVs will continue to disappear from retail shelves and HDTV sales will continue to boom. So on
this end I’m covered.
I also have a vested interested in seeing the adoption of HDTV not happening too quickly. The fact that it has
taken all these years to get this far is a beautiful thing. The conventional wisdom among cable networks is that the
market of HDTV consumers is still too small for them to cost justify investing in new content, equipment and
distribution, which for the biggest network conglomerates will reach hundreds of millions of dollars in conversion
costs, incremental equipment and distribution costs. The bigger the perceived cost for them, the slower they
move,the less the competition for HDNet and HDNet Movies.
This headstart has allowed, and will continue to allow us to release groundbreaking programs and events like the
day and date premiere of Enron The Smartest Guys in the Room on HDNet
Movies and in theaters. (we are ramping up to do this quarterly, then monthly!)
To take chances like broadcasting live from the Iraq Elections, The Vatican and The Middle East. To be way
ahead of the curve with our sports, news and entertainment programming. The more
time, the further ahead we will be when the transition finally takes place.
However, I also have a vested interest as an American citizen to see the analog spectrum occupied by regular TV
returned to the government so that it may be resold. Heck, our budge deficit needs every penny it can get, and
billions from an analog spectrum sale can’t hurt.
The spectrum can also be used for far better applications than regular analog TV. From military to high speed data
applications, it won’t take much to accomplish more. Plus, its not like free over the air TV is going away, it’s just
being replaced by over the air free digital TV signals.
The argument against replaceing the over the air analog TV signal with an over the air, free digital signal,
to return the spectrum has been two fold.
First, there are 10s of millions of TV sets that still get TV from over the air analog signals. Most are 2nd, 3rd,
4th sets in homes. In some places however, like here in Dallas, the percentage of homes that receive their primary TV
signal over the air in analog, can be as high as 40 pct. The question is, how are these people made happy when their
over the air analog signal is turned off and they are forced to get some form of equipment that enables their TVs to
receive an over the air digital signal. After all, in the USA, TV is as much a right as the First Amendment.
Which leads to the 2nd argument against.
Politicians want to be re-elected. If mom and dad, or grandma and grandpa can’t get their TV, or are confused
about how the whole thing will work, then they will be up in arms and we will see more political activism against
candidates than we have seen since the 1960s…
So of course politicians are afraid of the entire issue with just a few exceptions.
Rep Barton of Texas has attempted to take
the lead on forcing this issue forward. Rep Barton wants to set a date of Dec 31st 2006 as the cutoff date.
And he is right. That should be the date.
That cut off date provides plenty of time for everything that is going to happen to enable the transition to
happen. From reading and hearing all the debate, and I won’t rehash all the issues here, I think there are several
points that will ease the transition that have not been discussed.
Here they are:
1. The minute a date is set, everyone and anyone who can make money selling their product and service to the
estimated 20 pct of the American population who gets their analog TV over the air is going to start selling like it
was their last chance.
a. There will be a price war between cable, satellite and telco video providers to reach those 20mm
homes. I would expect that we will see deals like “$1 to get your entire home ready for the digital
conversion”. Instead of a free DVR, they will bundle in STBs for everyhome in the house.No video provider
wants to lose out on the chance to convert those 20mm to customers.b. The explosion in subs for all the video providers will also provide for an explosion in stock prices for all
of them. Sure their customer acquisition costs will go up, but they will also see an explosion in digital subs. The
stock market will ignore the costs as 1 time and extrapolate the digital opportunities per new sub andstock
prices will rocket up.c. There will also be a price war among TV manufacturers. This will be a once in a lifetime opportunity for them
to blow product out the door. They won’t miss out on the chance. Like the video providers, they will advertise
unbelieveable pricing specials and instead of offering promotion dollars for things like sound systems and
recliners that we often see at retail, we can expect to see trade in programs for analog sets and even bundling of
analog to digital convertors.If there is a risk to the 12/31/06 date, its that manufacturers can’t ramp up fast enough to handle the demand
and to gain volume efficiencies on sets. If they do have enough time, look for this to be the push that sends
Plasma and LCD sets far below 1k dollars for a 42″HDTV set.d. From a government perspective, there won’t be near the need for subsidies that most fear. The subsidies will
come from the video and TV providers in the form of customer acquisition investments in set top boxes and
promotional bundles of analog to digitial convertors.e. The biggest winner in the transition will be anyone who sells advertising. The amount of money spent by
interested parties to educate, confuse, market, brand and gain customers could dwarf what is spent on a
Presidential election because the stakes are higher. There arent many situations where 20mm new customers are
pushed to buy something by a deadline.If the big media companies want to see their stocks go up in 2006, seeing that this bill passes is the one way
to do it.
2. Finally, the last big gain from the analog to digital transition will be the bandwidth freed up on
cable networks. Once MSOs don’t have to providebandwidth for analog cable tv networks at 38mbs each, that
bandwidth can be freed up and used for other services, from HDTV to VOD to High Speed data. It could be the impetus
for download speeds to finally get far higher than where they are now.
It’s time for the analog to digital transition. Let’s support Rep Barton in his plans. We all stand to
gain.