Station Execs Cool on New Service’s Value

Mar 20, 2006  •  Post A Comment

Steve Lindsley, CEO of U.S. Digital Television, is defending his business after station owners this month said the over-the-air cable-channel provider may not catch on among consumers.

During a Bear Stearns investor conference in Florida on Feb. 28, the chief executives of Nexstar Broadcasting Group and Gray Television expressed skepticism about U.S. Digital Television’s serving as a model for stations looking to wring money out of their digital wavelengths. USDTV uses that spectrum to deliver its content to consumers, who receive the service via set-top box in their homes.

Gray chief executive Robert Prather said USDTV’s cost of acquiring customers is too high and that phone companies are more likely than Mr. Lindsley’s company to make inroads in the pay TV industry. U.S. Digital Television’s struggle to break into the business with new technology reflects heightening competition for television subscribers between cable companies, satellite TV providers and telephone companies.

“It doesn’t have tremendous appeal,” Nexstar CEO Perry Sook said.

Mr. Lindsley, who declines to provide U.S. Digital Television’s subscriber count, defended his company’s progress, saying USDTV plans to turn a profit soon and that he is “very pleased with the demand for our product.”

The company has attracted hundreds of new customers in the four markets where the service is available, Mr. Lindsley said. The subscriber counts for Las Vegas, Salt Lake City, Dallas and Albuquerque, N.M., will be released “within a reasonably short time frame,” he said.

The company, which officially began making the service commercially available in November after more than year of test marketing, is expected to begin offering the service in Norfolk, Va., this spring.

Founded in 2003, USDTV bills itself as a low-cost all-digital alternative to cable and satellite, offering an average of 30 channels-including 12 popular cable networks-plus local broadcast stations, via digital broadcast signals. Consumers purchase a set-top box from one of USDTV’s retail partners, including Wal-Mart, and pay a monthly fee of $19.95. High-definition channels are available at no additional cost.

Attracting Customers

The company counts as partners and is controlled by a group of broadcasters that includes LIN TV, Hearst-Argyle Television, Fox Television Stations, McGraw-Hill Broadcasting, Morgan Murphy Stations and Telecom DTV.

Mr. Lindsley plans to attract customers who haven’t signed up for cable or satellite and who want a wider selection of channels than regular broadcasters offer, and cable subscribers who feel they’re paying too much.

Longer term, USDTV will explore ways to offer additional services, potentially using parts of the digital spectrum to offer high-speed data service, Mr. Lindsley said.

“In the future we see ourselves as a media provider,” he said. “USDTV will offer more services like high-speed data and voice, VOD and TiVo-type services, but we will do it in a prudent and smart way that does not damage the business model.”