Cable Operators

The HD Wars Are Over. What’s the Next Battleground?

7/11/2011 12:01 AM Eastern

Four years ago, DirecTV fired the missile
that launched a high-definition arms race among pay TV
providers.

At the 2007 Consumer Electronics
Show, the satellite operator declared it
would offer 100 national channels by the
end of the year — at a time when many
operators didn’t have enough capacity to
offer more than 50.

Now, the smoke has cleared. The
panic has subsided among cable operators,
which have come within shouting
distance of the HD marketing claims of
DirecTV and Dish Network, at least in
most major markets.

‘OVERALL EXPERIENCE’

For DirecTV, the HD “bigger is better”
battle is over. “To be honest, I think
right now, everyone’s got most of the
important stuff in HD,” Derek Chang,
DirecTV executive vice president of content strategy and
development, said. “Once we got to 100 channels, it became
about delivering the overall experience.”

There’s less benefit in trying to hit 200 HDs because
those by their nature will be less-watched networks,
he noted. DirecTV is going to continue to add channels
“selectively as we see fit and where we can deliver value
to the customer,” Chang said. The satellite operator is
advancing along several new fronts, including 1080p HD
(Blu-ray Disc quality), early-premiere movies, sports, iPad
apps, multiroom viewing and enhancing the guide.

“HD is just one piece of the puzzle,” Chang said.

Comcast now offers 150 HD channels in Philadelphia, and
can “do that as necessary in any given market,” senior vice
president and general manager of video services Marcien
Jenckes said. He credits the MSO’s multiyear Project Calvary
analog-reclamation project for clearing room for HD.

The cable operator, as has been its strategy to counter
the HD channel-count marketing for the past several
years, is emphasizing its video-on-demand heft. In Xfinity
markets, Comcast now offers about 6,000 HD VOD selections,
out of 25,000 overall.

“Where there’s a war going on now, it’s an on-demand
war,” Jenckes said. “More than anything, consumers are
telling us they want choice.”

That said, he acknowledged cable “may have underestimated
the adoption curve around HD out of the gate … Today, we
have more than covered our position on that front and we can
actually very aggressively compete on that front.”

It turns out, there was very little switching
from cable TV to satellite because of
HD channel counts, according to Leichtman
Research Group president Bruce
Leichtman. In fact, DirecTV’s bigger
target in touting a triple-digit HD
offering was Dish.

“Now we’re at parity,” with perhaps the
exception of some rural areas, he said.
“But there’s never been a magic number
— there’s no difference in consumer perceptions
of 50 or 150 HDs. It’s just a feeling
of ‘a lot,’ and the question of, ‘Are there
core channels in HD that I am missing?’ ”

Most cable customers are not missing
a lot now, Leichtman said, and for
all the hand-wringing, satellite’s HD
lead never became a serious issue. “The
cable guys made it more of a concern
than it was,” he said.

For Suddenlink Communications, however, the HD deficit
was very real and required swift action to correct.

“If you go back to 2009, there was no doubt that satellite
was really taking the upper hand around positioning
themselves around HD,” Suddenlink executive vice
president and chief operating officer Tom McMillin said.
“Back then, we were hearing a lot that to stay competitive,
to keep up with the Joneses, we need more HD content.”

That fall, Suddenlink launched Project Imagine, a threeyear
plan to upgrade its networks and among other things
provide room for up to 200 HD channels.

By the end of this year, Suddenlink expects to have effectively
tripled the amount of HD it offers to more than 70 channels,
up from 24 two years ago. At the end of the first quarter,
the operator averaged 63 HD channels across its systems.

BASELINE: 100 HD NETS

At this point, a baseline of 100 HD channels has become
what customers expect, said Melani Griffith, Insight Communications’
senior vice president of programming and
video services.

“Having a significant number of HD channels is table
stakes,” she said. “If you want a customer to switch over,
certainly one of those factors is to have at least 100 HDs.”

Some providers believe having the most robust HD
linear channel lineup is still important. AT&T, for
one, claims the top tally of 176 HD channels in some
U-verse TV markets is the biggest offering anywhere
in the U.S.

“Having the most HDs is less about having a competitive
advantage — although that certainly plays into it — than
it is about delivering what the customers want,” AT&T senior
vice president of content Rob Thun said.

AT&T charges $10 per month extra for HD, which Th un
argued is a more “transparent” way to offer such a service.
“I think our competition charges for HD in a different way
… They ask for equipment fees or bury it in other charges,”
he said.

September