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HD Catching a Spark

Sep 29, 2003  •  Post A Comment

If the burst of activity this month is an accurate barometer, then the promises made about high-definition television over the past several years may be fulfilled.
In September alone iN Demand introduced two linear HD channels; EchoStar rolled out a package of four HD channels for $9.99; Cablevision added local channels to its HD lineup and unveiled an HD video-on-demand service; The WB doubled its HD offerings from a year ago to 11.5 of its total 15 hours of prime time; HD service now reaches the top 20 markets after Comcast’s introduction of service in Denver; and HDNet is finalizing a deal with a film production company to create original movies in HD starting in November.
A number of factors have collided to create this cascade of movement that may drive HD to widespread consumer adoption.
“I think what we have in place is the `Perfect Storm’ environment,” said Clint Stinchcomb, senior VP and general manager of Discovery HD Theater, which plans to spend $65 million over the next four to five years to produce 30 two-hour specials in HD. Mr. Stinchcomb listed factors affecting the current HDTV environment as the $70 billion that cable operators have spent on network upgrades; declining HD set prices and set-top box prices; pressure from the Federal Communications Commission on broadcasters to convert to digital by 2006; and growth in HD content from broadcasters and cable networks.
That growth includes HDNet’s expansion of original content through its nascent film project. HDNet plans to produce eight films each year in HD, said Mark Cuban, the outspoken founder of the all-HD network that launched two years ago. Each film’s budget will range from $1 million to $25 million. “We’re going all-out to take advantage of HD,” Mr. Cuban said. “We’re a network and not just trying to bring the analog world to HD.”
As HDNet aims to expand aggressively, new competitor iN Demand introduced what some in the industry call the “Cuban Killer”: its two all-HD channels, INHD and INHD2. The channels launched Sept. 15 on Comcast systems, with Time Warner, Cox and Brighthouse digital cable systems to follow this year. Those cable operators own iN Demand.
Content includes movies, documentaries, special events and sports such as Major League Baseball.
In time, iN Demand will produce original content for the channels, said Sergei Kuharsky, senior VP of marketing for iN Demand. The HD channels are commercial-free and rely on affiliate fees as the revenue stream. “I think we’re going to evolve and focus on what the future business model should be for a network,” he said. “We are exploring a lot of different ways of doing that-everything from sponsorships to promotional relationships. Unless you are in front of 40 [million] to 50 million eyeballs, you can’t sell ads,” he said.
The networks are currently available to about 500,000 Comcast subscribers who have HD-capable set-top boxes. Mr. Kuharsky said iN Demand will talk to satellite operators about carriage.
Since iN Demand is owned by four cable operators, it’s possible that HDNet could be shut out of those multiple system operators, since they will be carrying INHD and INHD2, said Adi Kishore, analyst with the Yankee Group.
Mr. Kishore added that the approach of Christmas is driving HD activity. “As we get closer to that, we will see more and more consumers walking into retail outlets looking to buy a TV set and getting sold HD,” he said.
By the end of the year, 9 million homes will have HD-capable sets and about one-third of those can receive HD content today, he said. By the end of 2007 nearly 47 million homes will have HD sets and nearly 42 million of those will be able to receive HD content, Mr. Kishore added.
According to the National Cable and Telecommunications Association, as of Sept. 1, 60 million cable homes are in an area that can receive HD service from local cable operators. That’s an increase of more than 60 percent since the beginning of the year. In addition, more than 230 broadcast stations are being transmitted digitally as of this month, up from 190 in June.
“We feel as though HD this year has really hit critical mass,” said NCTA spokesperson Rob Stoddard.
Work remains to be done, though. Broadcasters must continue the digital conversion, cable operators must complete more retransmission agreements with broadcasters to carry HD signals, and basic programmers must develop HD content, he said.