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RESEARCH: The Results Are In, But the Conclusions Are Confusing February 10, 1999 According to recent studies on the conversion to digital television, high-definition TV will fail because of high set costs, high-definition sets are already a success with consumers, the digital conversion will usher in an era of wide-screen personal computer monitors, high-definition sets will be available for $2,000 by the end of the year, and the success or failure of digital television will hinge on digital must-carry rules. This is but a smattering of the reams and reams of conclusions reached in lengthy reports by self-proclaimed independent analysts, researchers, and consultants on the broadcasters' conversion to digital television. The reports are the result of months, sometimes years, of research and can cost buyers anywhere from $2,000 to $7,500. For that price, people could buy a high-definition television and draw their own conclusions. Most studies are subsidized by manufacturers or broadcasters, which use the information to build business plans for digital TV products and services. The Forrester Research Group's "HDTV Dreams, SDTV Realities" is one of the more controversial reports on digital television because it basically concludes, "Digital TV will catch on, but expensive high-definition pictures won't." This is not what set manufacturers and the Consumer Electronics Manufacturers Association (CEMA) want to hear. Forrester's research includes interviews with the major set manufacturers like Sony, Phillips, Thomson Consumer Electronics, and others. Forrester also interviewed programmers including HBO and Discovery Communications, broadcast networks CBS and NBC, and local broadcasters such as Shockley Communications and Sinclair Broadcast Group. Forrester also spoke with the major satellite and cable television providers, as well as CEMA and the National Association of Broadcasters. In the end, Forrester concluded that manufacturer investment and production costs will keep high-definition set prices in the $2,000 range for the next 10 years, and only one million households—or 1 percent of U.S. homes by today's count—will own a high-definition set in 2003. However, Forrester predicts a bright future for standard-definition digital sets, which display digital pictures but not in the highest resolution. These sets, according to Forrester, will capitalize on picture and sound quality superior to today’s analog sets, at a fraction of the cost of their high-definition cousins. The problem with Forrester's research, as CEMA and others see it, is the study never asked consumers if they would pay $2,000 for a digital set, and it did not show consumers what a high-definition picture looks like. "The Forrester research results are wrong," CEMA President Gary Shapiro said in a response to the report. "Forrester makes predictions in its report about what consumers want without talking to consumers." Shapiro's statement can be seen more as a warning to manufacturers than to consumers. As CEMA Vice President of Market Research Todd Thibodeaux said, "most consumers don't pay attention to [research group] information." For the most part, he says, consumers learn about new technology, like high definition-television, from consumer electronics stores, friends, and relatives—not high-priced reports. Despite CEMA's lack of enthusiasm for the Forrester report, Thibodeaux sees value in some of the research on digital television. The McLaughlin Consulting Group, for example, has completed a study that also downplays the significance of high-definition TV, but offers manufacturers an idea they may not have thought of: widescreen, 16 by 9 ratio computer monitors. According to Chuck McLaughlin, co-author of the study, the data services and better picture quality broadcasters will deliver with digital signals will create a demand for wide-screen monitors. McLaughlin interviewed several monitor and television manufacturers in the United States and Japan for the study, which he originally sold on a subscription basis to manufacturers. However, he stressed the report is an industry survey, not a consumer study. McLaughlin plans to sell a scaled down version of the report for $7,500 to manufacturers and analysts who did not sign up for the original report. Thibodeaux agreed with the concept of McLaughlin’s study, saying it "pulls [manufacturers] out of their 'Oh, this is just a TV' mentality." Chris Chinock looked at how LCD-based microdisplays will change the size and cost of high-definition televisions. He makes the bold prediction that high-definition sets could be selling for as little as $2,000 by the end of this year. He cites as evidence Silicon Valley start-up Digital Reflection, which has built a 50-inch digital television slated to be priced in the $2,000 range. According to Chinock, the audience for his original report is “quite diverse” but centers on the "30 to 40 known players in the microdisplay industry," as well as investors and traditional set manufacturers. For his research, he interviewed set manufacturers using microdisplays such as Hitachi, Sharp, and Samsung. Government policy and regulation is also a major issue facing manufacturers during this transitional period. To address these concerns, Multimedia Research Group (MRG) investigated how certain policy decisions, particularly digital must-carry, will affect the digital roll-out. During its research, MRG interviewed all of the major cable and satellite companies, as well as several retail chains and set manufacturers. The group's report predicts that if digital must-carry rules are imposed, 5 million more digital set-top boxes will be sold than if no digital must-carry rules are adopted. MRG has also produced reports on broadcasters' transition to digital, interviewing local broadcast affiliates as well as the four major networks. Despite the efforts of these research groups, CEMA continues to be the grand-daddy of research, Thibodeaux contends. "We give away more research than anybody does," he said, noting that is one difference between trade association and consulting firm studies. CEMA spends $500,000 on research each year, providing forecasts for members every six months. All of the research is free to CEMA members. However, Thibodeaux does not begrudge research firms’ efforts. "More information is good...from all kinds of sources," he said. "I'm always of the mind, if a company gets one or two useful pieces of information from a report, it's worthwhile." --David Connell OTHER DIGITAL TV BEATS HBO HDTV GETS READY: Titles Coming Up On HBO HDTV March 10, 1999 THE DATA HORIZON: PBS Tackles the Bandwidth Usage Question February 24, 1999 NEW FEES: There Is No Such Thing as Free Spectrum January 27, 1999   CES TV Talk: More Buzz than the Sequins on an Elvis Jacket Jan. 13, 1999   CES: Bright Lights, Big Screens to Hit Las Vegas Dec. 16, 1998   LOCAL EFFORTS: Broadcasters Give Viewers a Push toward TV Purchase November 18, 1998   FIRSTS: Digital TV Broadcasts Hit the Airwaves November 4, 1998   THOMSON'S DBS BRAIN: Channels ARE Plentiful in New Digital TV World October 21, 1998   DECISIONS, DECISIONS: Taking the Plunge into Digital TV October 7, 1998   FIREWIRE: So the Blender Says to the Toaster, He Says... September 23, 1998 They're Here... September 9, 1998   GOT AN IDEA? 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