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Digital Television

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Matt Sbrogna

[edit] Who's Affected by the Switch

The only TVs that will be affected by this switch are older TVs which receive their signal through an over-the-air antennae. Any TV which is hooked up to a cable box or subscribes to some sort of service such as Comcast , DirecTV or a local provider will transition seamlessly with no action needed from the owner.^[2] As long as the TV has a digital tuner, it will still function after the switch. TVs 36" and larger manufactured after July 1, 2005 and TVs 25" and larger manufactured after March 1st, 2006 were required by law to have digital tuners installed.^[4]

In order for analog TVs to continue working, a converter box must be installed between the antennae and the TV, converting the new digital over-the-air broadcast into an analog signal which the TV can receive. The government has enacted a $1.5 billion subsidization program to assist consumers with the cost of the converter boxes. By applying online at https://www.dtv2009.gov or calling toll-free 1-888-DTV-2009 consumers can request two $40 coupons per household to be used toward the purchase of converter boxes which cost between $40 and $70.

[edit] Who Wins?

[edit] Converter Box Manufacturers

Small, private companies who target the lower end of the market such as RCA, Magnavox, and Zenith are manufacturing and selling the boxes to their already established market segment. ^[5]

High end consumer electronics companies such as Sony (SNE), LG, and Samsung are choosing not to make any converter boxes since the majority of the people who need the products are in the low end of the market, (elderly, low-income, and disabled). 48% of over-the-air viewers have incomes under $30,000, 38% of over-the-air viewers are over the age of 50, and 35% of over-the-air viewers have disabilities.^[6]

[edit] Brick and Mortar Retailers

While several online and phone retailers have been approved by the government for the coupon program, only seven brick and mortar stores have been approved. ^[7]

Best Buy (BBY), the largest consumer electronics store in the US^[8] stands to take a major share of the potential $1 Billion in revenue from converter box sales.
Circuit City (CC) will also likely sell a large percentage of the converter boxes as the second largest consumer electronics retailer in the US.^[9]
Sears (SHLD), Radioshack (RSH) and Kmart are all smaller players in the consumer electronics market, and will likely not see a substantial revenue increase from converter box sales.
Wal-Mart (WMT) and Target (TGT) are the two largest discount retailers in the US.^[9] While they are not immediately thought of as electronics retailers, the price sensitive consumers who are the majority of the market that needs converter boxes already know and trust the discount retailers to provide a low cost product.

[edit] Cable and Satellite Providers

Faced with the option of buying a new converter box to update a dying technology, many consumers may decide to subscribe to cable or satellite services for the first time or expand their current plan to cover all of the TVs in their homes.^[10]

Comcast (CMCSA) is the largest cable provider in the US^[11] and will likely receive the majority of customers who switch to cable service rather than keeping their old analog service and purchasing a converter box.
Time Warner (TWX) and Viacom (VIA) are the second and third largest cable providers in the US respectively^[11] and will receive additional customers because of the switch, especially in areas where Comcast is not available.

In addition to cable providers, many consumers may choose to receive their television from a satellite provider.

DirecTV (DTV) is the largest household satellite provider in the US with a customer base of over 16 million subscribers.^[12] DirecTV will be particularly appealing to customers residing where local cable service is minimal or non-existent, such as remote areas, RVs, and even houseboats.
Dish Network (DISH) is the second largest household satellite provider in the US.^[13] Dish Network is generally less expensive than DirecTV which will certainly influence the price sensitive consumers who will be considering this switch.

[edit] Consumers

Digital television provides many advantages over traditional analog television. Consumers benefit from digital TV's significantly clearer picture quality and better sound quality. Broadcasters such as Time Warner (TWX), Viacom (VIA), and NBC will benefit through digital broadcasting being more efficient than analog. Multicasting will allow broadcasters to transmit multiple free channels simultaneously rather than only a single channel at a time.^[14] The government is also benefiting from the DTV switch. In order to offset the government's $1.5 billion investment, it will auction off any unused portion of the spectrum to independent communication companies.^[3] The communication companies will use the spectrum for increasing cellular coverage and expanding data networks.

[edit] References

Retrieved from "http://www.wikinvest.com/concept/Digital_Television"

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