Industry Consolidation and New Service Deployment Will Drive Digital Cable Into 27 Million Homes by 2005, Says the Yankee Group

Dec 12, 2000, 00:00 ET from Yankee Group

    BOSTON, Dec. 12 /PRNewswire/ -- Consolidation among cable system operators
 and the increasing availability of new services, such as digital basic, video-
 on-demand, and interactive TV, will push the number of U.S. households
 subscribing to digital cable service to 27 million by 2005, according to a new
 report from the Yankee Group.
     (Photo: )
     The report, titled "Digital Cable Takes Off," notes that while industry
 consolidation has helped spur deployment of digital cable, most operators are
 still in the process of upgrading their infrastructure to offer this service
 and are finding rapid acceptance from a relatively small base of early-
 adopting consumers.  Over the long term however, the challenge will be
 attracting the next wave of subscribers once digital has fully penetrated the
 early adopter segment.
     "If the cable industry intends to meet its goal of having the majority of
 subscribers receiving digital cable, it must improve its value proposition,
 particularly to non-premium households," says Michael Goodman, senior analyst
 for the Yankee Group's Media & Entertainment Strategies practice.  "Originally
 designed to appeal to premium subscribers, which comprise approximately 32% of
 cable households, and with a typical entry price of approximately $45,
 operators will be hard pressed to get digital cable into the homes of
 consumers who spend less, don't have a set-top box and do not subscribe to a
 premium service."
      In order to appeal to these non-premium and price-sensitive households,
 cable operators like Comcast and AT&T are launching digital basic packages to
 appeal to non-premium households.
 In addition to greater availability and new programming packages, the Report
 predicts that interactive TV services such as TV-based Web access, T-commerce,
 and video-on-demand will help sustain demand for digital cable over the next
 five years.
                   Year                       Digital Cable Subscribers
                                                     (in Millions)
                  2000                                    7.7
                  2001                                   11.7
                  2002                                   15.5
                  2003                                   19.2
                  2004                                   23.1
                  2005                                   27.0
     Some other key findings from this Report include:
     -- The stage of deployment for digital cable varies by market, and this in
 turn affects the adoption rate.  In markets where digital cable has been
 available for several years, the rate of adoption may slow after the first
 early-adopting consumers are acquired.
     -- Interactive TV will further digital cable penetration.  Interactive TV
 applications, such as video-on-demand, e-mail, enhanced TV and high-speed
 Internet access via TV, all require a digital set-top box.  As these
 applications become available, consumers will need to upgrade to digital cable
 in order to gain access.
     -- Digital cable could eventually reach a maximum penetration of
 approximately 65% to 70% of cable subscribers.  Not all cable subscribers will
 subscribe to digital cable in any form.  Approximately 30% to 35% of cable
 subscribers will choose not to subscribe to digital cable.
     -- New subscribers offer cable operators a strong opportunity to sell
 digital cable.  While, cable's annual churn rate stands at approximately 26%,
 most of this churn is due to cable subscribers moving.  But when these moves
 are completed these customers renew their cable subscriptions at their new
 location, presenting customer service representatives with the opportunity to
 sell them digital cable.
     About Media & Entertainment Strategies Planning Service
     The Yankee Group is an internationally recognized leader in technology
 research and strategic consulting.  The company's Media & Entertainment
 Strategies practice examines the tradeoffs that businesses and consumers must
 make as traditional forms of media are joined by new products, services, and
 applications.  The Yankee Group continues to distinguish itself by providing
 personalized one-to-one analysis and planning assistance to its customers.
     About the Yankee Group
     The Yankee Group is an internationally recognized leader in technology
 research and strategic consulting, whose broad-reaching analysis encompasses
 all areas essential to e-business success: the Internet, electronic commerce,
 communications, wireless/mobile, computing, and enterprise applications.  The
 Yankee Group specializes in assisting companies with their e-business,
 enterprise networking, and Internet technology and electronic market
 initiatives while maintaining synergy with their overall business strategies.
 Headquartered in Boston, the company's research and sales staff is located
 throughout North America, Europe, Latin America, and Asia-Pacific.  With over
 30 different planning services, complete consulting capabilities, and a full
 calendar of technology-focused conferences and seminars held around the globe,
 the Yankee Group is truly a "one-stop shop" for strategic analysis and advice
 on the information technology industry as a whole.  The Yankee Group continues
 to distinguish itself by providing comprehensive research, electronic content
 delivery, and the industry's only personalized one-to-one approach for client
 inquiry. For additional information regarding the Yankee Group and the
 services it offers, please visit the company's web site at

SOURCE Yankee Group