Posted on Tuesday, March 25, 2008 @ 12:23:41 EDT by xtv
HD subscription penetration rates expected to climb to more than 65% in 5 years.
Monterey, CA, USA, March 25, 2008 (XTVWorld.Com) -- SNL Kagan's newest study, "Economics of High Definition Cable Networks," estimates that cable and satellite high definition subscribers will penetrate 65.7% of U.S. multichannel households by 2012, up from 18.8% in 2007. More than one-third of homes now have HDTV sets, with that number growing each year, so cable networks will face increasing pressure to offer more HD content.
According to SNL Kagan, 74 HD networks
have launched since 2003, offering a variety of programming options, from sports to family entertainment to movies. Several of these networks are simulcasts of their standard-definition counterparts, but some show content produced in HD or transferred from 35 mm film.
SNL Kagan identifies two main sources of network revenue in the new HD era: license fees and advertising. To gain wider distribution, simulcast networks will have to sacrifice license fees, which account for about half of a traditional cable
network's revenue stream. HD networks will try to compensate by increasing ad revenues, but it will be challenging to prove to advertisers that simulcast networks reach new viewers and therefore demand additional ad dollars.
"The 25 HD networks we tracked for this report tallied $49 million in gross ad revenue in 2007. We estimate that number will grow to $421.7 million by 2012, but it will still be small compared to sums generated by traditional cable networks," said Derek Baine, senior analyst
for SNL Kagan. "That segment of the industry posted $19.4 billion in ad revenue in 2007 and it is estimated to grow to $28.3 billion by 2011."
Despite the hurdles new HD networks have to overcome, SNL Kagan sees the potential for huge gain. "Revenue for traditional cable networks has grown steadily over the past decade from nearly $12 billion in 1998 to nearly $38 billion in 2007, a 13.7% CAGR," adds Baine. "Revenue for the HD networks was $465.1 million in 2007 and we think it
has the potential to grow to nearly $2 billion by 2012."
"Economics of High Definition Cable Networks" is available exclusively as part of the SNL Kagan Information Service. For more information on this report and other media and communications data sets within the SNL Kagan Information Service, call 866-296-3743 or e-mail SNLKaganSales@snl.com .
About SNL Kagan: SNL Kagan is a comprehensive resource for financial intelligence on the media & communications sector, including
the broadcasting, cable, entertainment, motion picture, telecom, wireless, satellite, publishing and new media industries. The SNL Kagan suite of products integrates breaking news, comprehensive data and expert analysis into an electronic database available online and updated around the clock. For more information, visit www.snlkagan.com.
About Kagan Media Appraisals: Kagan Media Appraisals, the consulting arm of SNL Kagan, offers custom studies, white papers, briefings, business plans, research
reports and appraisals from SNL Kagan's team of expert analysts. KMA is recognized industry-wide for actionable advisories, expert opinions, best practices, regulatory assessments and market data. Contact KaganConsulting @ snl.com or (831) 624-1536 for more information.
Contact: Richard Wilkes Tel. 434.951.7715 rwilkes @ snl.com
SNL Financial, One SNL Plaza, Charlottesville, VA 22902 United States
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