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HDTV Picture Is Getting Clearer

11 Mar, 2005 By: Jessica Wolf

Which comes first — the screen or the content?

That's the question the HDTV industry, one of the fastest growing consumer electronics categories, is struggling with. The transition to digital television and many other issues facing HDTV are hot topics at CEA's HDTV Summit being held this week in Washington, D.C.

And the pace at which HDTV penetrates the U.S. market will have a definite impact on the market development of the next generation of high definition discs.

More cablers and broadcast stations are offering more HD programming in anticipation of 2006's FCC-mandated soft deadline for the analog-to-digital transition, but it is by no means widespread.

Meanwhile, HDTV-capble sets represents the majority of TV sales at Best Buy, according to the leading chain — which is in line with the industry at large.

“The tide of consumer interest in HDTV keeps rising,” said Paula Baldwin, Best Buy spokesperson. “Just visit the TV aisle or home theater section at a Best Buy store, and you can see the interest by the number of people gathered in these departments to learn more about digital TV options for themselves.”

Last year, shoppers spent $2.7 billion on digital television products, including HDTV, according to the Consumer Electronics Association (CEA). Household DTV penetration is at about 16 percent, according to CEA.

But there is still a certain amount of consumer confusion out there when it comes to HDTV and its programming.

HDTV-Ready ... Or Not?One source of confusion is the hardware itself. There are sets with Plasma screens, LCD (Liquid Crystal Display) screens, rear-projection sets and direct view sets (tube TV). Prices are coming down all the time, but are still high, especially for plasma and LCD sets, which still hover in the $2,000-range.

There are entry level options in the $400-$450 price range, said Sean Wargo, director of industry analysis for CEA.

“The good news for consumers is if you want to buy into HD today there are ways to do it affordably and that's what's getting us the volume we're seeing,” he said.

One of the challenges incumbent on CE manufacturers, Wargo said, is making sure “integrated” sets that come installed with ATSC tuners — which is what translates the high-def content to the screen — continue to hit the market, as mandated last July by the FCC.

For non-integrated TVs the consumer has to buy a tuner separately. Those HD tuners can cost as much as $400. Or, they can arrange for a HD tuner through their local cable company, if it is being made available.

Still, people are buying, according to Josh Bernoff, VP and principal analyst for Forrester Research, and they will continue to. HDTV-capable (with or without the tuner) TV penetration will hit 23.3 million households in 2006, and more than double that to 57.3 million households by 2010, according to Forrester projections.

In fact, 35 percent of respondents in Forrester's June 2004 North American Consumer Technographics Study said the feature they most want on their next TV, is that it is HDTV-ready.

Content Coming On Fast
Content availability varies widely in different parts of the country, according to the FCC. About half (823) of local stations across the country are broadcasting HD content, serving more than 100 million households.

Even though the FCC has set a 2006 deadline for the analog-to-digital broadcast transition, that date will be extended and analog broadcasts will continue past 2006 if DTV service and equipment are not widespread. The criteria for widespread use is 85 percent household availability in each market. TV viewers who don't upgrade to some form of digital TV will have to purchase digital-to-analog converters (costing as much as $200) when the deadline passes. In October of last year, the FCC launched a consumer information Web site www.dtv.gov to help address content and hardware issues for HDTV buyers.

The big three — ABC, CBS, and NBC — already broadcast some programs in HD, as do Fox and PBS. Cable networks HBO, Showtime, Discovery, ESPN, TNT, Bravo and The History Channel are also already in the HDTV game. However, no one offers all HD programming all the time.

Non-broadcast HDTV content must come via digital cable or satellite, but satellite subscribers (as well as consumers using broadcast HDTV) must use an HDTV antenna to receive local channels, and these aren't necessarily foolproof, Bernoff pointed out in his report.

A problem for the cable side is that some HDTV owners with analog cable subscriptions — 35 percent from Forrester's study — mistakenly believe they already can watch HD programming.

Nevertheless, digital cable will emerge as the HD content delivery of choice as adoption grows over the next five years, according to Forrester. By the end of 2006, about 40 percent of HDTV-capable homes — 9 million households — will have digital cable.

Continued HD content rollout, especially from cable providers is key to growth, CES' Wargo said.

“It's happening and we're certainly encouraged by what we are seeing,” he said.

Bandwidth will quickly become an issue, Forrester's Bernoff said.

“Networks that make the move later than 2006 will find bandwith in short supply,” he wrote. Bernoff predicts by year-end we should hear HD-availability announcements from lagging networks like Cinemax, Comedy Central, FX, Lifetime, MTV, TBS, Nickelodeon and The Disney Channel.

Packaged Media Impact
HDTV buyers quite often make an immediate connection to DVD, Bernoff said.

Forrester's June study found that 43 percent of HDTV owners said they bought their set in order to watch DVDs in higher quality, and 44 percent of responding households said they also purchased a new DVD player at the same time. DVD hardware was the No.1 HDTV purchase add-on, according to Forrester.

That bodes well for next-gen high-def discs, suppliers said.

“HDTV displays play a very impactful role in the adoption of next-generation packaged media,” said Bob Chapek, president of Buena Vista Home Entertainment. “This growing segment, along with the increase of high-definition broadcasts, will certainly fuel consumer appetite for high-definition movies.”

A top-ranking executive from another major studio said the DVD connection to HDTV could also work in the opposite direction.

Since high-definition DVD players will be backward compatible with standard DVD, he said, it's possible consumers who want to buy new DVD players in the next few years will choose high-def hardware in part because they plan on purchasing an HDTV set in the near future.

One reason home entertainment content providers are adamant that next-generation high def discs must emerge, and soon, is because consumers are going to want home entertainment packaged media that looks as good as the programming they are getting from cable and satellite.

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