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Economies' Role in the Race Toward Digital TV
Abstract
Market economics sets are a useful, indeed inescapable, hurdle that new technologies must overcome—technological innovation by itself can't assure commercial success. HDTV's future has yet to identify or create a level of consumer demand that justifies the level of investment program producers and delivery systems will have to undertake. Investments currently are defensively driven, to prevent market-position losses should consumer demand appear. Globally, arguments for HDTV seem even less developed than in advanced economies. In the interim, government regulation and arm-twisting worldwide is acting as a powerful driver, though whether historically HDTV will benefit from such efforts (as computers once did) or lose (as nuclear power has) remains uncertain. The government's role won't disappear, despite talk of ‘deregulation’; academics should spend more time examining producer and delivery-system alliances, their effects on competition, and their ultimate provision of HDTV as an economical surrogate to analog for global consumers.
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Notes and References
Nathan Myrvold, ‘The Dawn of Technomania’, The New Yorker, 20-27 October 1997, pp. 236–237.
Hundt, quoted in Joel Brinkley, ‘Living with HDTV: “Everything will be different” ’, International Herald Tribune, 3 December 1996, p. 1.
TCI's Leo Hindery, though for his industry's own reasons, hasn't been reluctant to focus on the missing consumer element in the supply/demand equation. ‘If we cram HDTV down customers’ throats, we'll lose’, Hindery at the CTAM convention this summer, ‘The push for HDTV should come from the consumer, not from technology’. Cf. Donna Petrozzello, ‘Hindery takes aim at HDTV’, Broadcasting & Cable, 28 July 1997, p. 67. (For a slightly more conciliatory tone from the cable industry, cf. NCTA President Decker Anstrom's remarks in Multichannel News, 4 August 1997, p. 57.)
One recent study of 1000 consumers by Price Waterhouse concluded starkly that Americans ‘neither understand nor significantly value HDTV’. Cf. Mary Frost, ‘It will take more than a PC to unlock the door to digital TV’, Electronic Engineering Times, 14 July 1997. (Frost is managing director of the Entertainment, Media and Communications group at Price Waterhouse LLC Management Consulting.) On the need generally to bring set costs down to stimulate a mass market, cf. John Carey, ‘Looking back to the future: how communication technologies enter American households’, in John Pavlik & Everette Dennis, Demystifying Media Technology, Mountain View, CA, Mayfield Publishing, 1993.
California-based Multimedia Research Group---representative of the roll-out ‘optimists’---claims there could be 38 million TVs nationwide receiving digital programming by 2000, if US broadcasters would just speed up their switch from analog. (Cf. ‘Report reveals 22 million STB units for digital TV in US’, COMLINE News Service, 25 September 1997.)
But ‘web TV’---which allows access to the web through existing TV sets using an add-on box-is at least one early measure of such a demand for part of the digital revolution. WebTV, the company which pioneered the technology, has so far however been able to sell barely 150,000 units (at $350 each), despite a $25 million marketing effort and extensive free press coverage. (Cf. Jeanne C. Lee, ‘Web-ready television starts making Sense,’ Fortune, (13 October 1997, p. 158.)
Web TV's lackluster consumer experience moreover needs to be set against the larger engineering complexities associated with analog-to-digital conversion, according at least to one recent survey which concludes that ‘the United States seems lost on the past to the digital millennium’, and will need at least 15 years to shift to digital. (Cf. Dr Joseph Schatz, ‘DTV's rocky road’, Broadcast Engineering, September 1997.)
Most current estimates just for in-studio new equipment costs run $2-$4 million for each of the existing 1600 or so US TV stations, and don't include tower-conversion costs. (Cf. Glen Dickson, ‘The DTV push is on for 1998’, Broadcasting & Cable, 21 July 1997, p. 92.)
Complicating matters, the new FCC-approved digital standards may not even be compatible across the four new formats adopted, because of different bitstream characteristics, according to a recent study by Bhavesh Bhatt of the Sarnoff Corporation and David Mermreck of the National Institute of Standards and Technology. (Cf. Gerald Walker, ‘DTV warning signs’, World Broadcast News, October 1997.)
Cf. Gerald Walker, ‘DTV warning signs’, World Broadcast News, October 1997.
Cf. ‘China digital TV may prove profitable and popular’, FT Asia Intelligence Wire, 29 August 1997, p. 5.
Consider the history of railroads, municipal trolley lines, aircraft and auto manufacturers---all of which consolidated as capital requirements escalated as part of adaptive competition after initial technology development. Government's hand is seldom absent from such moments, though working in different directions at different times: consider the government's stated goal in 1970s airline deregulation, which included increasing the number of competitors. More than 100 new entrants appeared, and more than 100 quickly disappeared---with air traffic today more concentrated among fewer carriers than under regulation. The 1996 Telecom Act clearly advances consolidation amidst competition, by lifting previous limits on the number of stations jointly owned, among other features.
Cf., for example, Bruce Owen & Steven Wildman, Video Economics, (Cambridge, MA, Harvard University Press, 1992), Ch. 7, ‘Advanced television’, for the basic issues.
One should also note cautionarily that the standards conflict persists among Europe, the US, and Japan over digital transmission, if not compression, criteria. Cf. Andrew Pollack, ‘Tokyo speeds debut of digital broadcasts’, International Herald Tribune, 11 March 1997, p. 11.
Banking deregulation is another contemporaneous example of this phenomenon, with extensive interbank alliancing squaring off against similar insurance industry and mutual-fund industry behavior, to determine dominance of the emerging integrated financial services business.
Cf. Fred Dawson, ‘Digital TV picture remains a muddle’ Multichannel News, 18 August 1997, p. 1.
Cf. George Leopold & Junk Yoshida, ‘PC camp blinks in standoff over HDTV formats’, Electronic Engineering Times, 21 July 1997.
For an informed behind-the-scenes look at how Hundt and Bill Gates maneuvered the PC industry into the Grand Alliance discussions, and its ramifications, cf. George Leopold & Junko Yoshida, ‘When the chairmen of the FCC and Microsoft met, they altered the course of advanced television and opened the door to a new force in government’, Electronic Engineering Times, 14 July 1997.
Hundt, quoted in Ref. 2.
Michael Noll, ‘Digital television, analog consumers’, Telecommunications, September 1997, p. 18.
My own intuition is that a good deal of any 1000-channel satellite-based delivery capacity---if and when it comes---will be used on a national or linguistically common regional basis to deliver feature movies on at least several hundred of those channels. The routine delivery of a dozen or so movies per 24-hour period, any one of which a home viewer can watch or download to the home VCR (or its coming replacement) is a more economically plausible use of those channels than global rebroadcasting of local-market-specific programming, as Noll suggests. The market future here is a threat to Blockbuster and its global equivalents, not the promise of being able to tune into what's on in Nairobi, Nogales, Nome, or Nagoya at that same moment.
Richard Parker, Mixed Signals: The Future of Global Television News, New York, Twentieth Century Fund, 1996.
Cf. William J. Fox, ‘Junk News: Can Public Broadcasters Buck the Tabloid Tendencies of Market-drive Journalism? A Canadian Experience’, Joan Shorenstein Center, JFK School of Government, Harvard University, Discussion Paper D-26, August 1997.
One should note that Mr Ed and the like will continue to be exported by Hollywood, and dubbed into scores of local languages for local markets. In that sense, Hollywood (and the US) can count on a continuing and rising balance of payments surplus, just as it has in the analog era. But like US trade in the larger global market, it can also expect to see its share of total global programming decline as privatization encourages local and cost-sharing regional program production efforts in a competitive multichannel environment.
Cf. Parker, op. cit., Ref. 18.
Grove, quoted in Joel Brinkley, ‘Living with HDTV: everything will be different’, International Herald Tribune, 3 December 1996, p. 1. For TCI's Leo Hindery's reaction to Grove, and to the larger threat of cable-market ‘invasion’ by the PC industry, cf. Donna Petrozella, ‘Hindery takes aim at HDTV,’ Broadcasting & Cable, 28 July 1997, p. 67.
Jeanne C. Lee, ‘Web-ready television starts making sense’, Fortune, 13 October 1997, p. 158.
Cf. Geraldine Fabrikant, ‘Satellite TV provider waits for world to catch up’, New York Times, 3 November 1997, p. D1.