A New Era in Television?

A recently released study has found that the high price of digital television sets, high capital investment costs, lack of advertising support, and scant offerings from broadcasters have restrained the penetration of digital television since its rollout in November 1998. But the report concludes that "despite its anti-climactic beginning, digital television still represents an important and potentially lucrative market in the consumer television industry."

According to Frost & Sullivan's new research, "U.S. Consumer Televisions Markets," revenues are projected to increase from $8.97 billion in 1998 to $9.22 billion in 1999, and are expected to grow continually throughout the forecast period (1998-2005). The report's authors say that to capitalize on this burgeoning segment, market participants will need to devote sufficient resources to a range of strategies, including consumer education, aggressive advertising, and discount pricing.

Other findings: The market for digital television will not reach its full potential until after 2010 because of the slow transition from analog to digital, and sales of analog sets should continue until the market sees full acceptance of digital technology and the price of digital televisions declines to comparable price points. The research also finds that the persistence of good economic conditions in the US has significantly impacted and increased sales in several segments of the industry, including large-screen televisions and TV/VCR combination sets.

Looking toward understanding consumer spending patterns, Frost & Sullivan analyst Donna Ann Pusey says that "because of increased spending power, consumers have developed a proclivity for large-screen television sets and enhanced features. The development of the home-theater market and growth in the video-game and educational-material markets has also positively impacted analog television sales. The price of analog color television sets has declined to the point where consumers are able to purchase multiple sets for the household, including additional sets for younger household members."

On the negative side, the study has found that bandwidth and compatibility issues and a shortage of digital broadcasts over terrestrial cable lines have resulted in major obstacles to the penetration of digital television. "As US cable television penetration is estimated at over 70%, it is imperative that compatibility issues be resolved in order to persuade consumers to make the switch to digital," says the report.

Frost & Sullivan also has announced its 1999 Market Engineering Awards, which are given to companies that it feels "have worked hard to make a positive contribution to the US consumer television industry." Fujitsu has received the Product Innovation Award, the Marketing Strategy Award goes to Philips Consumer Electronics, and the Competitive Strategy Award is awarded to Thomson Consumer Electronics.