Eric Shanks believes cable networks are losing viewers to the Internet because their programming isn’t in high definition.
“The reason cable networks are losing market share to the Internet is they don’t have a quality argument against the Internet,” said Mr. Shanks, executive VP of entertainment for DirecTV. “Until they go to HD, they will continue to lose relevance in consumers’ and viewers’ minds.”
That belief is among the reasons DirecTV is betting big on hi-def by launching satellites that will enable copious amounts of bandwidth for HD channels. The operator hasn’t lined up deals yet with content providers to fill that new pipeline because more networks first must flip the switch on hi-def. But when they do, the operator will be ready. And Mr. Shanks contends that networks must make the transition to hi-def to compete against the new threat of online video.
The satellite operator began its aggressive hi-def rollout strategy last fall with the launches of two new satellites specifically to handle local broadcast channels in HD. It is also building about seven uplink facilities, some of which are operational already, to correspond with those satellites. Those twin satellites rely on “spot beam frequency” rather than a national frequency to direct local station signals into a particular market instead of nationally, Mr. Shanks said.
Launching the local satellites enables DirecTV to deliver the most popular hi-def content, namely the broadcast networks and their prime-time shows. So far, DirecTV reaches 62 percent of U.S. homes in 42 local markets, including the top 10 markets, with local signals.
DirecTV plans to add two more satellites in the next year that will make it possible for the operator to deliver 150 national hi-def channels. While networks such as TNT, National Geographic, Discovery, HGTV and Food Network have launched networks in hi-def, Mr. Shanks believes every network should deliver its programs in HD.
“Look at two channels in the same genre. One is HD and one is SD. You will kill your competitors if you have an HD signal,” he said. “Where is the Comedy Central in HD? Where are the news channels? Where is the full-time MTV? HD is a must-have to keep people watching TV.”
As the Internet becomes more popular for watching video, the advantage a television set has is in the higher-quality picture that hi-def affords. “The channels that are going to be slow to offer that will be marginalized,” Mr. Shanks said.
Currently DirecTV offers in hi-def the local channels, a handful of regional sports networks, Major League Baseball and NFL games, and cable networks including ESPN, ESPN2, Discovery HD Theater, HDNet, HDNet Movies, TNT, Universal HD, HBO and Showtime. In addition, DirecTV carried several March Madness basketball games in hi-def and offers pay-per-view movies in HD. Finally, DirecTV programs and produces its own HD channel.
A plethora of hi-def channels is necessary because when consumers get a hi-def set, they first tune to the HD channels. “If you have an HD channel in an HD home, you are going to get higher ratings,” Mr. Shanks said. “I think you will see networks jump on board and that we will have a significant number of HD channels that have made the transition by the middle of next year. You will start to see some HD-only channels pop up.”
This hi-def push by DirecTV indicates how the satellite operator is seeking to differentiate itself from its cable competitors and from satellite rival EchoStar, said Todd Chanko, an analyst with Jupiter Research. Additional capacity is critical because hi-def programs are bandwidth hogs.