• by Michael Shields , July 19, 2004

In a development that is symbolic of the rapid growth of digital media overall, nearly half (45 percent) of multi-channel TV households now have either digital cable or satellite TV service, according to the 2004 edition of an annual report from media researcher Horowitz Associates. "The transfer to the digital home is well underway," says Howard Horowitz, president of Horowitz. "We are getting very close to a mass audience." Exactly what percentage of homes represents a critical mass is always a topic of debate on Madison Avenue, but historically a 50 percent threshold is deemed an important TV penetration milestone, and Horowitz believes the adoption of digital TV services will ultimately alter the viewing habits and advertising outlets for marketers.

So far, digital cable has mostly increased the number of channels consumers receive. But that will soon change, Horowitz says, as digital capabilities will influence the ways that viewers watch TV. Specifically, TV viewers will have more choices and more control, while advertisers will have a less wide-open medium.

"Homes tuned in to digital [have] even greater diversity of programming and new platforms," Horowitz notes. "Counter to that, the choice options, the control mechanisms like interactive programming guides, are more likely to have an impact on the actual signal that reaches consumers."

This, Horowitz says, will allow viewers either more sampling or more restrictions. Add to that the fact that digital cable is also hastening the penetration of TiVo-like digital video recorders, which may further throw traditional TV viewing out of whack.

The study also found that digital cable subscribers are more inclined to go for the extras (and thus avoid commercial television): nearly two-thirds (65 percent versus 55 percent of satellite users) pay for premium channels, with 42 percent of these subscribers paying for two or more of those channels.

Both digital cable and satellite users purchase pay-per-view movies regularly (39 percent of digital subscribers and 41 percent of satellite subscribers order at least one movie a month). And 38 percent of digital cable subscribers who have access to video on demand on order an average of three movies per month.

Yet with all these viewing options, and the competitive nature of the landscape, churn is an issue for both camps. Twenty-two percent of digital cable subscribers and 8 percent of satellite subscribers say they might discontinue their digital/satellite service within the next six months.