More free previews necessary to expand untapped market, according to diginet survey

A recent Canadian survey has found relatively limited interest in digital cable in analog cable households at this time, even with high awareness of the launch of new digital specialty television channels last fall. The findings suggest cable operators must do more to promote the features of digital cable to upgrade analog subscribers to the premium service. The survey, conducted in January by Toronto-based Solutions Research Group Consultants Inc., found that only 25 per cent of analog cable households are very (6 per cent) or somewhat (19 per cent) interested in digital cable when provided with a description of its features. Top Ten Digital Specialty Channels By Interest January 20021DejaView2Showcase Action3National Geographic Channel4Animal Planet5Discovery Civilization Channel6The Biography Channel7Lonestar8BBC Canada9MTV Canada10Men TV* Base: 18+, digital households, English-speaking Canada. To measure the strength and salience of the new channels, 510 digital households were asked: "Based on what you’ve seen so far, which of the new digital specialty channels interest you the most?" Overall, nearly 50 channel names were mentioned on an unaided, top-of-mind basis. Source: Solutions Research Group Diginet Monitor January 2002.But industry observers, including Solutions Research Group partner Kaan Yigit, note that consumers are migrating to digital. And it’s likely a combination of the new digital channels, better picture and sound quality, expanded pay-per-view offerings, and other services and features that’s convincing them to do so. According to Decima Publishing’s latest research, the total number of digital TV subscribers in Canada increased by 12.7 per cent or nearly 320,000 between August/September 2001 and November/December 2001, when the diginets were in free preview mode. Digital cable subscribers increased by 16 per cent or nearly 140,000 subscribers. "I think it will be a combination of everything that is going to get people to move to digital," says Phyllis Yaffe, CEO of Alliance Atlantis Broadcasting. "In some cases, we have seen great growth (in digital) since the new channels have been brought in. Clearly that is an important factor. But I think VOD or other technological developments will also be big motivators and I think when you add them all up, I think you will see some really strong momentum to go to the digital technology." Yigit estimates that a concerted marketing effort for the new diginets could result in 10 per cent of analog cable subscribers, or some 800,000 customers, moving to digital. According to the Solutions Research Group survey, the results of which are detailed in a nine-page report called SRG Diginet Monitor, seven in ten analog cable subscribers have heard, seen, or read something about the launch of the new digital channels. But Yigit believes another major marketing campaign is necessary to drive customers to the new diginets, otherwise some of them are bound to fail. More importantly, Yigit believes another marketing could lure a portion of the current digital subscribers who didn’t preview the channels the first time around into buying some. "Basically if nothing happens, if it’s status quo and a second wave of marketing doesn’t happen, I would not be surprised if as many as 50 per cent of the channels fail or are pulled by companies. That’s my opinion. I would expect that nobody wants to lose money for years," Yigit tells CCR. The prediction of failures is not reflected in the numbers in the report, but Yigit says that what the research does show is that there is untapped market potential for the diginets. The report reveals that as many as 24 per cent of digital subscribers had not seen any of the new channels by January 2002, after they had been on free preview for three or four months. "Will it be tough for some of these channels to make it through? Yes. I don’t think there is any debate," Yigit says. "But what the research shows is that the more you go back to the consumer and allow for additional sampling, the more penetration you can achieve. So what you can do is minimize the number of channels that would be in financial difficulty, or that cannot meet their business plans in the medium term." Yigit believes that diginet failures "would be devastating to the industry. It would be a blow to consumer confidence and it would taint future launches. I think there would be a perceptual problem launching new services against this base of customers the next time around, and it could inconvenience a great number of customers also, who would have to go and pick other channels if, for example, two or three of the channels they had chosen in a package were gone." Allan Schwebel, VP of affiliate sales and marketing at CHUM Television, says the research supports initiatives that broadcasters are currently investigating. He notes that a digital marketing subcommittee has been formed, discussions are underway with distributors on marketing campaigns, a toll-free customer order line has been set up, and additional free previews are being contemplated. "I think that research is timely because it underscores that there was a rather large segment of existing digital subscribers who did not get to sample many of the channels," he notes. Schwebel says broadcasters are looking at introducing free weekend previews for the diginets – similar to what has been done in the past with movie channels and other pay television channels. He adds that it’s too early to panic. "I think it is still early days, and we clearly recognize that there’s a marketing challenge ahead of us," he tells CCR. "And we’re (CHUM) the originals who survived with very low numbers. If you recall MuchMusic when it was one of the first specialty services launched, it launched on a premium basis with 100,000 subscribers. And we’ve turned that into one of the top ten specialty channels in Canada by revenue, which is primarily advertising." Yaffe notes that the numbers have improved since the survey was done. "…My sense is that there has been much more pick-up since the results of the study, and the results from the distributors are proving that," she tells CCR. "Now, it doesn’t mean that everyone is buying everything. But it certainly says that part of the offering has been chosen by subscribers." The SRG Diginet Monitor notes that to date, the leading genres are movies, sports and music. The top ten digital channel brands that have top-of-mind awareness in analog households are: The Biography Channel, BBC Canada, National Geographic Channel, MuchVibe, Discovery Civilization Channel, Raptors NBA TV, Drive-in Classics, Tech TV, Sex TV, and PrideVision. The chart below shows the ten diginets that survey respondents said they are most interested in. The Solutions Research Group research was based on interviews with adults 18 years of age and older in 1,250 cable and direct-to-home satellite TV households in English-speaking Canada. The interviews were conducted between January 17-22, just as the free previews ended. Of the total sample, 510 were conducted in digital households, accurate to within plus or minus 4.3 percentage points, and 740 in analog households, accurate to plus or minus 3.6 points.

More free previews necessary to expand untapped market, according to diginet survey

Broadcast | March 1, 2002

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