Digital TV conversion may be messy


Anthony J. DiClemente and his team of analysts at Lehman Brothers suspect that the preparations for the transition to all-digital television are somewhat behind schedule. On the plus side, however, they say that the number of viewers likely to be affected is relatively small, and that the 2/17/99 target date should be hit.

DiClemente cites the NAB’s estimate that at present some 60% of the population is "completely unaware" of the coming transition. However, he believes that aware or not, by the end of 2008 only about 11% of all TV households will be at risk, somewhere between 12.5M-13M households, which is the number expected to be reliant on over-the-air broadcast only. The rest of the nation is expected to have a subscription to an MVPD service of one kind or another. DiClemente says that he expects MVPDs to pass on broadcast signals usable on both digital and analog receivers whether or not the FCC mandates dual coverage, a topic it is taking up next week.

The remaining households will need digital-to-analog converter boxes, which will be government subsidized through a coupon program to the tune of 40 dollars per unit up to a potential total of about 1.5B dollars.

DiClemente and his team think there may be a problem reaching some hard-core air-only viewers. "The worst-case scenario is that the consumer awareness efforts do not reach the group most impacted by the transition and their televisions no longer work the morning after the February 17, 2009 deadline." He suspects that individuals caught unprepared will act quickly to get back up and running, with the biggest danger being cut off from broadcast during a catastrophic event.

But it shouldn’t make much bottom-line difference. "From a broadcasting standpoint, these viewers probably don’t represent targeted demographics and additionally, it is not clear that Nielsen’s measurement methodology would even miss them until they readjusted television households for the following year, by which time they would likely have gotten a converter and be back on the grid, so minimal financial impact. As such, we believe the biggest risk this transition poses is more political in nature than financial."

He concludes, "While the execution on this transition will likely continue to be messy and the finger-pointing is probably far from over, we believe that the transition will ultimately get done. And we believe it will get done on time."

TVBR/RBR observation: As we’ve said a number of times, the people who rely on over-the-air television WATCH over-the-air television, making them one of the easiest groups imaginable to target with a television campaign. Maybe a refined effort will place an emphasis on senior citizens, since they seem to be widely regarded as the biggest segment of the at-risk group. But all television stations can be expected to participate in this bread-and-butter issue and make sure the key element of their business model doesn’t suddenly disappear on winter’s day in 2009.