Cable subscriptions will rise little on digital switch

By Danny King -- Video Business, 3/27/2008

MARCH 27 | Blockbuster, Netflix and other DVD-rental services may have found an unlikely ally in the U.S. switch to digital broadcasting next year: the federal government.

Just one out of 10 households that now get their TV broadcasts over the air will start subscribing to satellite, cable or fiber-optic TV packages in order to maintain TV service after the U.S. switches to digital broadcasts from analog next February, according to the Assn. of Public Television Stations. Meanwhile, about two-thirds of the 14 million over-the-air households will either get a digital set-top box converter or buy a new digital TV in order to make the switch, APTS reports.

“A lot of these people are very discriminating about their broadcasting and just don’t feel the need for all of that programming,” said Mark Erstling, chief operating officer of Washington-based APTS, who added that some parents will avoid cable or satellite TV in order to keep greater programming control when children are in the house. “You buy the set-top box once, and you get the content for free. That’s very appealing.”

Further preventing cost-conscious over-the-air viewers from switching to cable is a federal government program that provides coupons worth as much as $80 that may be used to offset the cost of new digital set-top box converters, which sell for between $50 and $60 at Wal-Mart and Best Buy. Since January, U.S. consumers have ordered more than $337 million worth of coupons, according to the U.S. Commerce Department’s National Telecommunications & Information Administration Web site.

None of which helps cable and satellite companies attract prospective DVD renters by touting more linear channels and video-on-demand choices. While the switch to digital may not signal a huge increase in DVD demand, it’s unlikely to hurt demand either, Erstling said.

“Satellite and cable companies have to make a strong consumer proposition,” said Erstling. “Netflix is offering on-demand movies online. There are a lot of choices out there.”