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What comes first, digital content or HDTVs?

Michelle Manafy

March 27, 2021 | Digital television is the chicken and digital content is the egg. Or is it the other way around? Can an appreciable demand for digital televisions ever arise without compelling content? At the same time, can broadcasters justify the expense of producing digital content without a sufficient installed base of receivers? It is with just this in mind that the FCC recently announced plans to require television manufacturers to include HDTV tuners in new devices. Although the FCC has mandated that broadcasters must start offering digital programs in the next few years, they have until 2006 to return their analog channels--but only if 85% of U.S. households have digital sets by then.

DTV sales exceeded the 80,000-unit mark this January, according to figures released by the Consumer Electronics Association (CEA). Based on the current rate of growth, sales would reach 10.5 million in 2006. With the current installed base of televisions at about 220 million, this projection falls far short of the requisite 85%. Thus, the FCC has been compelled to take further steps to ensure the future of digital television.

The CEA has come out strongly against the mandate, however, stating that manufacturers have done their share to promote the new format and that this type of requirement would drive television prices up and limit consumer options. "This proposal, even if phased-in, will increase costs for American taxpayers," says CEA president and CEO Gary Shapiro. "We estimate that such a mandate could add hundreds of dollars to the cost of almost every television set, pricing many lower-income Americans out of the market and severely slowing the DTV transition."

Shapiro argues that the proposal also would inhibit the ability of consumers to choose how and when they will enter the digital television era. "Consumers have demonstrated that they want options when making the decision to upgrade to DTV," Shapiro notes. "Our own experience combined with sales figures and reports from retailers show that most consumers are choosing to upgrade to a high quality, DTV-upgradeable monitor now to enhance their DVD, DBS, or analog experience and purchase a digital tuner later when more broadcast programming becomes available."

Response from television manufacturers has been mixed. The Sanyo Fisher Company states that they support the CEA position. While Sanyo is in favor of the evolution of DTV, company sources say, "We feel that it is best left up to the free market and the consumer to determine the timing and value of such a change."

Though Pioneer agrees that there is a much higher cost to producing these televisions and an even higher cost to adding these tuners into the mix, Pioneer itself is in a position to benefit from the mandates. Pioneer consumer electronics and product planning marketing VP Matthew Dever describes Pioneer's place in the market as a niche player in the television arena. "We produce projection TVs so we are in a small part (10%) of the business level. Two years ago Pioneer went with a complete digital chassis so we are already in line with the government mandates except for advanced television tuners." As such, Pioneer's costs could drop significantly as more (and therefore less expensive) tuners become available.

If there is widespread adoption of digital television, Dever believes HDTV prices will drop--eventually. In the short term, he does think that there will be a premium paid by consumers as manufacturers shift over from analog to digital production. Dever says, "Everyone realizes that there is a high cost from both the hardware and broadcast sides to make this happen." He feels the government is putting equal pressure on both sides of the equation. Meanwhile, Dever is all for getting HDTV rolled out at a much quicker pace. "From Pioneer's standpoint," he says, "we don't have a problem with it, as long as it is an equal playing field."

"We are sort of protected from this impact," says Dever. "It could benefit Pioneer in that the ATSC tuner prices will drop and we will then be able to include them while keeping prices down. Our biggest issue is that the product isn't out there to ramp up consumer appetite for digital television. They get the set home and there may be only a handful of television shows out there for them to view in high definition." And the FCC's actions speak loud and clear about the need for a widespread installed base of devices to compel broadcasters to produce digital content.

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