CES 2009: DTV Transition Seen Adding 1.7 Million Pay-TV Subs
But Predicts About Two-Thirds of New Subscribers Will Be Basic Cable
By Todd Spangler -- Multichannel News, 1/9/2009 12:22:00 PM
Las Vegas—The elimination of analog TV broadcasts in the U.S.—currently set for Feb. 17, although the incoming Obama administration is hoping to push the date back—will give cable and satellite operators in the U.S. roughly 1.7 million new subscribers, according to a forecast by investment bank Barclays Capital.
Alan Miles, Barclays Capital vice president of equity research for media, Internet and telecommunications, said the digital TV transition will not be a significant business event for most pay-TV providers.
“For a lot of the major players, it’s not a big deal,” Miles said. He spoke on a panel discussion here at CES, “Digital TV Transition: Are We Ready?” moderated by Broadcasting & Cable senior editor Glen Dickson.
There’s uncertainty about whether the digital TV cutover date will remain Feb. 17 or get pushed back. On Thursday, President-elect Barack Obama called for the DTV transition to be postponed, arguing that poor, rural and elderly residents will be unprepared for the cutoff of analog TV signals.
Delaying the DTV transition by a few months probably won’t help consumers get ready any sooner than they would be on Feb. 17, said Emily Neilson, president and general manager of KLAS-TV, the CBS affiliate in Las Vegas.
“It’s not that people haven’t heard the message. It’s that they haven’t taken action,” she said. “I think they still won’t take action until the day before or at midnight.”
Moving the Feb. 17 cutover also would disrupt Nielsen’s ratings and, by extension, national TV advertising, Neilson said.
“Essentially there’s no sweeps in February or March. Everything is going to be about May—that’s what will be critical, that’s what we’ll sell on,” she said. “If it gets delayed, then what’s Nielsen going to do? That’s the advertising industry’s currency. That’s a mess for the buyers.”
In terms of the upside for pay-TV operators, Miles acknowledged that the full effect of the DTV transition won’t be known until after it happens. But he pointed out that those new subscribers are likely to sign up for nothing more than lifeline cable. “These [subs] are not worth a lot of money,” he said.
Barclays estimates that cable will pick up two-thirds of the 1.7 million new subscribers, or around 1 million, with the rest going to satellite TV. About 17 million households currently rely on over-the-air TV in the U.S., according to the firm.
Miles also predicted that the DTV transition will produce a high number of consumer calls nationally: 1.2 million on the first day, and 2.5 million the first week. He extrapolated those figures from the results of the DTV cutover in Wilmington, N.C., in September.
The Wilmington market is small, its terrain is flat, so digital TV signals carry reasonably well, and only 7% of households rely on over-the-air broadcasts. “So Wilmington should have been a layup,” he said. “In fact, there was a high number of calls.”
About 1.2% of Wilmington households, 2,272 viewers, contacted the Federal Communications Commission’s local call center with various issues after losing analog signals.
Neilson said KLAS conducted a test Dec. 17 test during which it temporarily shut off analog broadcasts throughout the day. The station received about 2,000 calls from viewers over 48 hours.
“We strongly believe there needs to be some technical help after the transition,” Neilson said. “Whose responsibility is it? Is it the television station’s? The company that sold you the antenna?”
The AARP has received a $2.5 million contract from the FCC to establish a call center to help consumers through the transition. “We feel people are going to be befuddled even if they do get their converter set up,” said Lynn Mento, AARP’s senior vice president of membership.
Americans 50 and older are getting ready for the DTV transition “in line with the rest of the population,” Mento said. AARP estimates that 20% of people in that age group who haven’t already moved to digital TV will not do so even after the transition, either because TV is not important enough or because they can’t afford it.
Brian Dietz, National Cable & Telecommunications Association vice president of communications, said on the panel that the trade group is having discussions with the National Association of Broadcasters and other groups about establishing a national call center to field consumer inquiries starting a few days before the transition date.
But, Dietz said, “we’re not sure where that will go if the date is changed.”
Another huge issue that looms, according to Neilson, is exactly how big the “cliff effect” will be. The term refers to the total loss of a digital TV signal in areas beyond the reach of transmitters. She said 12% of KLAS viewers receive the station's over-the-air signal.
“We use over-the-air for our live crews, and we have trouble getting reception,” Neilson said. “We’re quite concerned about it. It’s not going to be as easy as plugging in a converter box, and all is well.”
Miles said his firm conducted “man-on-the-street” interviews in Wilmington. In addition to irritation and confusion about the change, people voiced concerns about installing digital-to-analog converters obtained through the government’s $40 coupon program.
“One thing we heard was this paranoia, Big Brother thing: ‘What is the government doing with that box in my house?’” Miles said.
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