Post by dkennedy on May 3, 2005 5:02:44 GMT -5
Cable Firms Embracing Digital Video Recorders
Tuesday, May 3, 2005
BY REINHARDT KRAUSE
INVESTOR'S BUSINESS DAILY
Comcast (CMCSA) and other big cable TV firms are plowing ahead with digital video recorders — devices that consumers want but that pose a threat to advertising revenue.
DVR technology — a field pioneered by TiVo (TIVO) — lets viewers pause, rewind or replay any live broadcast by recording it onto a hard drive.
It also lets users fast-forward past commercials. That's a big drawback to advertisers.
The devices provided 32% of the cable industry's $57.6 billion in revenue last year. The risk for cable firms is that as DVRs proliferate, advertisers will try to bargain down prices for TV commercials.
Among cable operators, Time Warner (TWX) has marketed DVR services the most aggressively. But the No. 1 cable service provider, Comcast, is catching up.
"Time Warner has been pushing DVRs with a huge amount of success," said John Bernoff, analyst at Forrester Research. "Comcast is just starting to get going. But Comcast has a much larger number of subscribers (21.4 million) than Time Warner (10.9 million)."
Cable customers typically lease the DVR from their cable provider — just as they do with traditional set-top boxes.
DVRs are available to all Comcast, Time Warner and Cox Communications subscribers, Bernoff notes. Charter Communications (CHTR) offers DVRs to three-quarters of its customers. Cablevision Systems, (CVC) meanwhile, has yet to roll out DVRs.
As satellite TV firms compete fiercely for customers, cable companies are under pressure to offer new services. DVRs could be a key way for them to hold onto subscribers, Bernoff says.
Satellite providers were early proponents of DVRs, and that helped them lure away cable customers. But satellite firms no longer have that edge.
"It's going to be much tougher for satellite companies in the face of almost universal (DVR) availability among cable operators," he said.
Satellite Firms Still Lead
For now, satellite companies EchoStar (DISH) and DirecTV (DTV) still have the biggest chunk of DVR users.
Half of the 6.5 million U.S. households with DVRs get them from satellite firms, says Forrester Research.
A quarter of consumers bought the devices directly from DVR makers, mainly TiVo. It charges $12.95 a month for DVR services.
That leaves 25% of the market that gets DVRs from cable TV firms.
Cable companies see that number rising quickly. At an industry conference in April, Comcast President Steve Burke said he expected cable firms to grab almost half of the U.S. DVR market in three years.
Overall, 35.7 million U.S. homes should have DVRs by 2008, Forrester predicts. That's up from 11 million in 2005.
Time Warner Cable had 862,000 DVR customers at the end of 2004. It will likely give an update on that number when it reports first-quarter earnings Wednesday. Time Warner charges subscribers $9.95 monthly for DVRs.
'Multiroom' Devices
Time Warner recently began leasing "multiroom" DVRs, said spokesman Keith Cocozza. The devices enable customers to share TV shows stored on one DVR with set-tops in up to three other rooms.
Comcast doesn't provide a specific tally of its DVR customers. But when the company reported first-quarter earnings April 28, it said 1.6 million subscribers were using set-top boxes equipped for either high-definition TV tuners or DVRs.
Craig Moffett, analyst at Bernstein Research, estimates that Comcast had about 625,000 DVR customers as of March 31. He projects that Comcast will have 1.8 million DVR customers by the end of 2005.
Comcast charges customers $9.95 monthly for set-top boxes equipped with a high-definition TV and DVR.
"DVRs are still only a tiny contributor" to Comcast's revenue, Moffett wrote in a note to clients. He thinks DVR revenue will provide a significant boost in a few years.
Even so, cable firms' revenue growth from DVRs may be offset by a slower rise in advertising revenue.
In 2004, the cable industry ad revenue jumped 13%, or $2.2 billion, to $18.8 billion, says Brian Dietz, spokesman for the National Cable & Telecommunications Association. That's not something cable firms want to threaten, analysts say.
Still, some think that new software technologies may help advertisers reach DVR users. And no one predicts a steep drop in ad spending. Cable network advertising should grow an average of 8.8% annually between 2005 and 2008, according PriceWaterhouseCoopers.
Good For Marketing
Comcast views DVRs as a marketing tool to attract more subscribers to digital TV services.
About 40% of Comcast's 21.4 million users pay for digital services, which offer more channels and video on demand.
In Comcast's quarterly earnings call April 28, Burke said DVRs and high-definition channels would be key to boosting digital penetration. Digital customers could reach 55% of Comcast's customer base "over time," Burke said.
In mid-March, Comcast said it would offer a customized version of TiVo's software on its advanced set-top boxes.
Comcast will bring the feature to the majority of its markets by late 2006. Financial terms of the seven-year deal weren't disclosed.
DirecTV now resells TiVo's DVRs. But their deal expires in early 2007. DirecTV plans to roll out DVRs from another company, NDS, later this year. News Corp. (NWSA) owns both DirecTV and NDS.
Jenny Moyer, a Comcast spokeswoman, says the company will continue to offer Motorola-made set-tops without TiVo's software.
Analysts say Comcast will offer TiVo's features for a few dollars extra monthly.
Forrester's Bernoff thinks that if TiVo's features prove popular, TiVo-equipped set-tops could evolve into Comcast's main DVR product.
Tuesday, May 3, 2005
BY REINHARDT KRAUSE
INVESTOR'S BUSINESS DAILY
Comcast (CMCSA) and other big cable TV firms are plowing ahead with digital video recorders — devices that consumers want but that pose a threat to advertising revenue.
DVR technology — a field pioneered by TiVo (TIVO) — lets viewers pause, rewind or replay any live broadcast by recording it onto a hard drive.
It also lets users fast-forward past commercials. That's a big drawback to advertisers.
The devices provided 32% of the cable industry's $57.6 billion in revenue last year. The risk for cable firms is that as DVRs proliferate, advertisers will try to bargain down prices for TV commercials.
Among cable operators, Time Warner (TWX) has marketed DVR services the most aggressively. But the No. 1 cable service provider, Comcast, is catching up.
"Time Warner has been pushing DVRs with a huge amount of success," said John Bernoff, analyst at Forrester Research. "Comcast is just starting to get going. But Comcast has a much larger number of subscribers (21.4 million) than Time Warner (10.9 million)."
Cable customers typically lease the DVR from their cable provider — just as they do with traditional set-top boxes.
DVRs are available to all Comcast, Time Warner and Cox Communications subscribers, Bernoff notes. Charter Communications (CHTR) offers DVRs to three-quarters of its customers. Cablevision Systems, (CVC) meanwhile, has yet to roll out DVRs.
As satellite TV firms compete fiercely for customers, cable companies are under pressure to offer new services. DVRs could be a key way for them to hold onto subscribers, Bernoff says.
Satellite providers were early proponents of DVRs, and that helped them lure away cable customers. But satellite firms no longer have that edge.
"It's going to be much tougher for satellite companies in the face of almost universal (DVR) availability among cable operators," he said.
Satellite Firms Still Lead
For now, satellite companies EchoStar (DISH) and DirecTV (DTV) still have the biggest chunk of DVR users.
Half of the 6.5 million U.S. households with DVRs get them from satellite firms, says Forrester Research.
A quarter of consumers bought the devices directly from DVR makers, mainly TiVo. It charges $12.95 a month for DVR services.
That leaves 25% of the market that gets DVRs from cable TV firms.
Cable companies see that number rising quickly. At an industry conference in April, Comcast President Steve Burke said he expected cable firms to grab almost half of the U.S. DVR market in three years.
Overall, 35.7 million U.S. homes should have DVRs by 2008, Forrester predicts. That's up from 11 million in 2005.
Time Warner Cable had 862,000 DVR customers at the end of 2004. It will likely give an update on that number when it reports first-quarter earnings Wednesday. Time Warner charges subscribers $9.95 monthly for DVRs.
'Multiroom' Devices
Time Warner recently began leasing "multiroom" DVRs, said spokesman Keith Cocozza. The devices enable customers to share TV shows stored on one DVR with set-tops in up to three other rooms.
Comcast doesn't provide a specific tally of its DVR customers. But when the company reported first-quarter earnings April 28, it said 1.6 million subscribers were using set-top boxes equipped for either high-definition TV tuners or DVRs.
Craig Moffett, analyst at Bernstein Research, estimates that Comcast had about 625,000 DVR customers as of March 31. He projects that Comcast will have 1.8 million DVR customers by the end of 2005.
Comcast charges customers $9.95 monthly for set-top boxes equipped with a high-definition TV and DVR.
"DVRs are still only a tiny contributor" to Comcast's revenue, Moffett wrote in a note to clients. He thinks DVR revenue will provide a significant boost in a few years.
Even so, cable firms' revenue growth from DVRs may be offset by a slower rise in advertising revenue.
In 2004, the cable industry ad revenue jumped 13%, or $2.2 billion, to $18.8 billion, says Brian Dietz, spokesman for the National Cable & Telecommunications Association. That's not something cable firms want to threaten, analysts say.
Still, some think that new software technologies may help advertisers reach DVR users. And no one predicts a steep drop in ad spending. Cable network advertising should grow an average of 8.8% annually between 2005 and 2008, according PriceWaterhouseCoopers.
Good For Marketing
Comcast views DVRs as a marketing tool to attract more subscribers to digital TV services.
About 40% of Comcast's 21.4 million users pay for digital services, which offer more channels and video on demand.
In Comcast's quarterly earnings call April 28, Burke said DVRs and high-definition channels would be key to boosting digital penetration. Digital customers could reach 55% of Comcast's customer base "over time," Burke said.
In mid-March, Comcast said it would offer a customized version of TiVo's software on its advanced set-top boxes.
Comcast will bring the feature to the majority of its markets by late 2006. Financial terms of the seven-year deal weren't disclosed.
DirecTV now resells TiVo's DVRs. But their deal expires in early 2007. DirecTV plans to roll out DVRs from another company, NDS, later this year. News Corp. (NWSA) owns both DirecTV and NDS.
Jenny Moyer, a Comcast spokeswoman, says the company will continue to offer Motorola-made set-tops without TiVo's software.
Analysts say Comcast will offer TiVo's features for a few dollars extra monthly.
Forrester's Bernoff thinks that if TiVo's features prove popular, TiVo-equipped set-tops could evolve into Comcast's main DVR product.