Digital transition may delete millions of viewers

By Sam Adams

LOS ANGELES (Hollywood Reporter) - A year from Sunday, television for many Americans will cut to black. Analog signals will stop transmitting, older sets will become useless and millions of TV-watching households will simply disappear.

At least that's the doomsday scenario confronting the TV industry as a government mandate forces all U.S. stations to convert to digital from the analog signals that have been broadcast on the same frequencies since the 1930s.

An estimated 21 million households have TV sets that receive only over-the-air signals, and about 14 million of those homes rely solely on analog TVs, according to Nielsen Media Research. For viewers who don't upgrade to digital-ready TVs or set-top converters, February 18, 2009, will begin with a blank screen instead of a smiling Meredith Vieira. For TV executives, that day could be catastrophic.

"You could see a 5%-7% drop in the ratings in a heartbeat," says Shelly Palmer, president of the New York branch of the National Academy of Television Arts & Sciences. Palmer estimates such a drop could translate to as much as $3 billion in lost revenue for networks, studios and stations.

Congress is preparing for the switch, allocating money for 33.5 million $40 coupons to defray the cost of set-top converters, which retail for about $50-$70. Each U.S. household is entitled to request up to two coupons, redeemable at a certified retailer within 90 days.

In addition, the National Association of Broadcasters is spending $700 million on digital TV education, which includes localized speaking engagements, informational ads set to premiere next week and a cross-country tour by two "DTV trekkers," customized vans made up to resemble analog TV sets.

But networks are confronting the possibility that the education efforts won't work and their already-eroding audience numbers will take another hit in the middle of next February's sweep. NBC already has asked Nielsen to move up that sweep period so it ends before the transition, and other executives are keeping a close eye on what's being done.

"A year out, is it daunting? Yes. Are people fully engaged? Yes. No matter what we do, it's not going to be perfect," says Martin Franks, executive vp at CBS Television. "It's just how much we can minimize any consumer disruption."

The initial response to the government coupon program has been strong -- 2.5 million requests in the first two weeks. But a recent study by the Association of Public Television Stations found that 61% of over-the-air households had heard nothing about the transition, and a survey released in November by the Leichtman Research Group found that only 19% of analog households strongly agreed that they understood how the transition would affect them.

With a year to go, those numbers will almost certainly change. NAB already points to its own study showing that 83% of over-the-air households have "seen, read or heard something about" the transition, up from 38% a year ago.

But Congress is not requiring retailers to participate in the coupon program, and only about 100 of them are certified to do so. Further, no one knows whether the increased awareness will translate into consumers taking action before their TVs go dark.

"I think the American public has close to zero awareness of what's coming," Bob Pittman, a co-founder of MTV and member of private investment firm Pilot Group, told an audience at the television industry's recent NATPE convention in Las Vegas. "I think they're going to be hopping mad at the government when (it) turns off the TV."

According to spokesman John Taylor, LG Electronics has two entry-level converter boxes already in stores. Taylor, a member of the board of the DTV Transition Coalition, says LG expects to sell millions of the boxes during the next year and that its research indicates consumer response will not heat up until the deadline grows closer.

"The real action for coupon ordering and sales takes off in the second half of 2008," he says.

Federal Communications Commission (FCC) chairman Kevin Martin echoed this sentiment at the Consumer Electronics Show in January, defending the strategy of waiting to ramp up education initiatives. "I think in general we don't want to put too much emphasis on that too early," Martin says.