If a Comcast customer is unaware of a high-definition video-on-demand programming inventory that has grown fivefold since the beginning of the year, don’t blame the company.
“If they’re buying an HDTV, they’re most likely going to access VOD,” said Derek Harrar, Comcast’s senior VP and general manager of video services. “And we promote the bejesus out of it.”
Whereas satellite leaders DirecTV and Dish Networks have been playing a game of “top this” by periodically announcing another batch of linear HD channels available to customers, cable companies’ efforts to capitalize on the high-definition television boom have been as varied as the geographic regions they cover.
Hamstrung by bandwidth limitations that don’t apply as much to satellite providers and upstart telecommunications TV services like Verizon’s FiOS and AT&T’s U-verse, cable companies, whose services are used by about 60% of U.S. households, have preached features like video-on-demand choices and lower prices to lure HDTV owners or keep them from jumping ship.
Comcast, whose 24.4 million customers make it the largest U.S. cable service, has been the most aggressive at pitching its HD services. With about 40 linear HD channels—less than half what DirecTV and Dish offer—Comcast said in January that it would give its subscribers 1,000 HD “choices”—i.e., film and television titles on VOD, linear HD channels and music videos—by the end of the year. In October, the company said it reached that goal more than two months early.
Taking a different approach, Time Warner Cable, whose 45 HD channels put it slightly ahead of Comcast but whose 300 VOD titles in HD lag Comcast’s inventory, calls itself “Home of Free HD.” With more than 13 million cable customers, the No. 2 U.S. cable company has been highlighting how satellite operators charge subscribers with lower-priced packages about $10 a month for HD service, while TWC’s HD service is free of charge.
“We are successfully rolling out switched digital video across our footprint and have been expanding our HD options every week,” said Robyn Watson, spokeswoman for Time Warner Cable. “More important, it’s the channels our customers are telling us are most important and that they are the ones they want to watch.”
Meanwhile, smaller cable companies like Cox Communications and Charter Communications have been playing catch-up. Cox, which has about 6 million cable subscribers, has announced institutional agreements since June involving providing high-definition video-on-demand at Las Vegas’ Encore at Wynn and being the video provider at colleges such as the University of Florida.
Charter, whose 5 million-plus subscribers make it the No. 4 U.S. cable company, in August publicized an agreement to show Summer Olympics VOD programming in HD that was similar to Comcast’s. The company has as many as 40 linear HD channels in some markets and 350 VOD choices in HD, according to Charter spokeswoman Anita Lamont.
“While those of us in the industry think consumers are counting the number of HD channels, the reality is they just want to stay with what they’ve got,” said Bruce Leichtman, president of Leichtman Research Group. “So the messaging is much more about retention, saying, ‘Just stay with us and you’re fine.”
At stake are a growing number of U.S. households that have purchased HDTVs to take advantage of visually clearer technology while ensuring broadcast viewing after the U.S. switches over to all-digital broadcasts in February. By next year, almost 40% of North American households will own a 1080p, or so-called “true HD,” TV, up from just 18% last year, NPD Group unit DisplaySearch said in September. As a result, the number of satellite and cable subscribers receiving HD from their multichannel service operators doubled last year to about 24 million and may double again this year.
Whether the HD pitching strategies have worked remains in question. Comcast last week said it boosted the number of digital cable customers with either HDTV or digital video recorder service during the third quarter by about 300,000 to 7.3 million. And while Time Warner Cable said its digital video subscriber base during the quarter expanded 1.5% to 8.61 million customers, it didn’t disclose how many were receiving HD or DVR service.
Still, cable companies have had to gird themselves not only against DirecTV and Dish, which have more than 30 million subscribers combined, but also against telecommunications giants that have launched their own television services within the past three years.
Competitors Are Growing
Last month, AT&T and Verizon, the two largest U.S. phone companies, said their respective U-verse and FiOS services accelerated their combined third-quarter customer growth by adding 465,000 subscribers, up from a combined 346,000 in the second quarter. FiOS’ 100 HD linear channels and 800 VOD choices in HD appear to allow it to go toe-to-toe with both DirecTV and Comcast from a content standpoint, while U-verse’s 75 HD channels also trump the cable companies’ selection.
Such competition only figures to increase. Between now and 2013, the number of U.S. cable subscribers will be little changed, at about 64 million, while the satellite subscriber base will expand about 8% to 33.4 million, consultant SNL Kagan said last month. During the same period, the number of telco video subscribers will jump fivefold to more than 11 million, SNL Kagan said.
Still, as home sales slow and people cut back on spending, cable consumers are likely to give cable companies more time to increase their HD inventory toward the levels of their satellite or telecommunications competitors before taking the time and money to switch over, Sanford C. Bernstein analyst Craig Moffett wrote in a note to analysts last month.
“No company is ‘recession-proof,’” Mr. Moffett wrote. “Cable may be as close as you can get.”