But Will It Add More Subs and More Revenue?

Implications: DirecTV has added 21 new HD Channels to their existing tier of 31 toward a goal of 100 by year end. This is great news for their subscribers and for those who understand and appreciate the big difference that viewing in HD can make. However, the question becomes whether this will add a significant number of new subscribers and/or cause existing customers to upgrade their service to the HD or premium packages. A Best Buy study released earlier this week notes that education is still required to insure that owners of HD TVs fully understand the need to add an HD service to their existing accounts from DirecTV, Dish, their local cable companies or even the nascent video delivery services from the telcos. The study released by Best Buy this week states that only 19% of HDTV owners indicate they fully understand HD. See http://www.tradingmarkets.com/.site/news/Stock%20News/650274/ for more information on the study.

Analysis: On the surface the DirecTV announcement is great as the US moves forward in its conversion from analog to digital and, in turn, to HD service. This should place DirecTV clearly in the lead for number of HD channels available as compared to the full range of their competitors.

According to the article, “new channels include CNN HD, A&E HD, The History Channel HD and The NFL Network HD. Many of the channels will be available to current subscribers of DirecTV’s $9.95 per month HD service tier at no additional charge. Premium HD channels will be available to subscribers who have signed up for those premium service packages.”

The fact is, those tiers are already expensive and for someone buying a new and expensive HDTV who may not understand the need to add an HD service, new HD versions of existing channels may not be enough to drive subscriber count.

Even with a robust holiday sales season for new HD TVs, it remains to be seen whether the public will respond to purchasing the add-on service to get HD quality pictures from the TVs.

There are too many people who buy the new TVs, watch a standard definition (SD) show and come away impressed, as it is always a better picture than what they had previously on their old sets.

The same goes for people who watch an SD DVD on the new set and recognize that it is significantly better than what they had.

As I had pointed out in Battling it Out – Skirmishes Continuing(http://news.glgroup.com/CM/Analysis/PostDetail.aspx?pid=16219 ) major price breaks will be required for the next generation DVD players before the consumer gets on board and purchases one – either one – HD DVD or Blu Ray.

The same is true for HD service. Until the pricing is lower concurrent with the cost of new HDTVs decreasing, significant changes in subscriber count and in turn a big uptick in revenue will not be forthcoming.