Study Suggests Pay HD Strategy

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The TV industry is going digital in the United States, but not because it
particularly wants to, according to a new study by Forrester Research Inc.

The study concluded that despite federal mandates to convert television
signals to digital in the next few years, TV players -- including broadcasters,
cable companies and networks -- see no way to profit from digital and, in
particular, high-definition TV.

Instead, they are doing so only to please regulators, which explains why the
digital conversion is progressing slowly, according to the researchers.

Despite the hype over the introduction of HDTV programming, the study found
that more than 500 broadcasters have yet to convert to digital transmission, and
only 6 percent of HDTV owners can receive over-the-air digital broadcasts. Also,
only 3 percent of all consumers own high-definition TVs.

To accelerate HD adoption, Forrester researchers suggested three changes in
industry strategy that emphasize profit over novelty.

First, cable operators should charge more for HD services, with the reasoning
that the segment of the viewing public willing to pay for the expensive
high-definition sets will also be willing to pay $10 monthly to see HD
shows.

The researchers also recommended that operators pay broadcast networks for HD
programming. Although a break with tradition, the Forrester researchers said it
is reasonable given the fact that the highest-rated HD programs are on local
network channels. Doing so will encourage the networks to produce more
programming in HD, according to the study.

Finally, the Forrester study suggested that federal regulators should allow
these pay-to-view service models be allowed to develop without interference.
Allowing HDTV owners to pay for the high-definition services they receive
provides a necessary profit incentive to encourage more digital content.

With some $300 million in profit possible from a $10 monthly HD service
charge, it could also halt the steady rise in cable bills industrywide, the
report added.

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