Hi-Def TV: Business Picture Becoming Clearer

Oct 30, 2006  •  Post A Comment

The Consumer Electronics Association has predicted that 2007 will be the year that retailers sell more high-definition TV sets than standard-definition units. Meanwhile, both cable operators and cable programmers are girding for a busy holiday shopping season and putting promotions and marketing plans in place. The fourth quarter is the biggest quarter for shopping, and all hi-def eyes will be watching sales figures closely as they roll in during the next two months.

CEA reported that digital sets are expected to outsell analog sets by 66 percent this year-19.7 million DTV units to 11.9 million analog. And more than half of those digital TVs are hi-def.

In general, the holiday season is the busy buying time for gadgets and TV sets. Consumer electronics gifts will account for about 25 percent of all holiday gifts this season, up from 21 percent last year, according to CEA.

“Prices are the big thing that is going to be driving holiday sales-the free fall,” said Rob Enderle, a consumer electronics analyst with Enderle Group. Prices for hi-def sets have fallen to half of what they were a year ago, he said. “This is the biggest drop I have seen in a 12-month period of time. We are getting to the point where we are close to the limits of where we can get with panel prices and it’s an amazing reduction in price.”

While prices traditionally drop on sets each year, Mr. Enderle attributes this year’s larger-than-normal dip to additional manufacturing capacity allocated to hi-def sets this year. “They are making more and it’s cheaper,” he said.

For instance, a consumer can buy a 37-inch LCD flat-screen set for under $800 today. That same set would have been a little under $2,000 a year or two ago, he said. One of the most popular items this year will be the 42-inch plasma-screen TV, and that can be had for about $1,200 to $1,400-about half of its price from a year ago. “Typically, 42-inch is the sweet spot because it gets you into the big-screen world,” he said.

But despite the falling prices, a number of hurdles remain before hi-def becomes a more mainstream product, Mr. Enderle said. “There is a lack of true good hi-def programming,” he said. “Now it’s programming’s turn to catch up. …. After this holiday season, there will be a massive number of people who will have hi-def televisions and the end result is we need more content.”

Programmers say they are doing their part to provide hi-def nourishment. Discovery HD Theater, for instance, plans to up its hi-def output in December, premiering 62 new hours of hi-def programming that month. That’s about double the network’s typical output, and it will continue to produce at that accelerated pace going forward, said Clint Stinchcomb, executive VP of new media and HDTV for Discovery. “For those people who buy their sets after Thanksgiving instead of waiting until Christmas or New Year’s, we are going to give them sustenance like they have never had in their life,” he said.

Discovery HD Theater has also scheduled a big hi-def programming event that kicks off Jan. 1 to satisfy those who got their sets later in the holiday season. On that day the network launches its “Atlas HD Marathon,” in which it will run the past four episodes of its flagship hi-def series “Atlas” that debuted this fall.

That event will jump-start a weeklong programming stunt called “World of HD.” During the week Discovery will give viewers a sneak peek of what’s coming up on Discovery HD Theater in 2007. The network will also continue its “HD First” premiere strategy that began this year. That strategy calls for Discovery HD Theater to premiere shows and specials in hi-def in advance of their premiere on the linear counterparts, such as Discovery Channel or Travel Channel.

Other marketing efforts include ongoing promotions with retail partners, such as Circuit City stores and stores served by Premier Retail Networks. Also, the network makes its programming available on hi-def DVDs in its Discovery Channel stores.

Discovery also has a partnership in place with set maker Samsung for its programming to be showcased on more than 30,000 Samsung hi-def sets in more than 40 countries around the world, in venues such as exhibitions, public spaces and retail locations.

But the big elephant in the room when it comes to hi-def is the fact that about half of consumers who have hi-def sets still don’t subscribe to hi-def programming, said Bryan Burns, ESPN’s VP for strategic business planning and development. He said ESPN is devising its marketing plans for the holiday season, and the company will focus on getting that word out to consumers. “The problem is consumers must be advised when they come into retail,” he said.

Operators say they’ll do their part too. Cox plans to support retailers this season with in-store creative. The operator also offers online and video-on-demand tutorials and provides incentives for its technicians to sign up consumers for hi-def service.

Comcast said it’s promoting hi-def programming in conjunction with video-on-demand since Comcast offers more than 100 hours of hi-def content on VOD. The operator started an awareness campaign with a free preview of Starz in September with the premiere of the movie “The Chronicles of Narnia.”

The operator ran interstitials and featured hi-def educational information on its VOD barker channel about setting up hi-def service. Comcast also is working with ESPN and Fox to develop tags for their cross-channel NFL advertisements that remind viewers that to get hi-def programming, they need a hi-def receiver. The ESPN spots are currently running, and the Fox spots should kick in at the end of October.

Time Warner’s fourth-quarter marketing campaign will incorporate a hi-def component in its TV, radio, print, point of sale, direct mail and online marketing. The operator said it will also work on educational tutorials.

When they lay their credit card down, they need to be able to get service at the same time,” he said. “We will be doing some things through our distributor partners to convince consumers they have to get service in advance.”