Fast-forwarding digital cable
Source: CNet News
Big Cable has sunk more than $70 billion into digital upgrades for U.S. cable systems, but consumers have yet to be persuaded that the cost of the service is worthwhile.
Each month nearly 5 percent of digital subscribers either downgrade from it or cancel altogether--twice the churn rate of basic cable.
Most of the defectors switch either to satellite TV or to TiVo-type services that enable them, for the upfront cost of a $200 to $400 digital video recorder (DVR), to not only watch what they want when they want it but also to skip pesky commercials. No wonder the penetration rate of digital cable has leveled off. It doesn't measure up to the competition.
Yet the cable industry might still have a shot at redeeming its multibillion-dollar investment. Regional trials show that video on demand--the old dream of delivering movies or programs to viewers when they actually want to watch them--has tested encouragingly well with cable subscribers. In these tests, viewers have watched television more and deserted their cable companies less. They are even willing to pay an extra $10 to $14 a month for the privilege.
The one hitch is that television networks and studios--on which cable systems depend for on-demand content--live in mortal fear that any new digital scheme, whether for on-demand or TiVo-type services, will jeopardize their advertising revenue and any brand recognition they have with consumers. The objections of the networks might soon be overcome, however, if cable systems compensate them for lost advertising by sharing the revenue from on-demand services.
