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US Retailers Hope To Cash In On DTV Transition

Posted on: Saturday, 13 June 2009, 06:20 CDT

Friday’s deadline for the transition to digital television has U.S. retailers anticipating a boost in consumer demand for secondary television sets as they scrap their older, analog sets.

The digital transition has already created a surge in sales of converter boxes among those holding on to their existing analog TV sets.  Cable and satellite service providers have also seen a small uptick in sales for those who want to upgrade.

Retailers are now hoping that consumers will replace their analog TVs in bedrooms and spare rooms that aren’t connected to cable or satellite service.

"Those are good candidates for over-the-air digital televisions," said Ross Rubin, director of industry analysis at the market researcher NPD Group, in an interview with Reuters.

It took the federal government roughly $2 billion and 13 years to reach the Friday deadline for the remaining 1,000 broadcasters to switch to digital transmission. Some 760 broadcasters had already made the transition ahead of the deadline. The move frees up analog signals for local police and firefighters.

To assist American consumers in preparing for the transition, the government distributed some 59 million coupons, worth $40 each, to subsidize the cost of purchasing converter boxes. So far, only about half have been used, so there will continue to be some sales over the next 90 days until the coupons expire, analysts say.

The transition has been profitable for converter box makers and retailers such as RadioShack Corp.

"Radio Shack has clearly benefited from very significant sales of converter boxes over the last several quarters," Barclays Capital's Michael Lasser told Reuters.

The spike in DTV box sales generated about $200 million last year.  However, the temporary uptick in revenue has already been priced into the stocks, Lasser added.

The challenge for Radio Shack is in capitalizing on the increased store traffic by placing DTV boxes next to other items that buyers will hopefully find attractive, he said.

"This is just another step in the evolution of Radio Shack to define its niche in the rapidly changing marketplace for consumer electronics.”

Cable and satellite companies saw increases in their first quarter earnings as a result of the digital transition, with Time Warner Cable Inc. and Comcast Corp. posting higher-than-expected quarterly profits.  Both firms have suggested the possibility of additional increases in subscribers during the current quarter, but said customer growth would likely slow in the second quarter compared with the first quarter.

The original deadline for the digital TV transition was February, but Congress extended it after learning that nearly 6 million households were not yet ready.

As of this week, about 2.5 percent of U.S. television-watching households, or 2.8 million, rely on antennas to receive television shows, according to a Reuters report citing figures by the Nielsen Company.

The digital transition was intended to free up analog signals for public service use.   However, the move has been costly, with broadcasters having spent $5 billion in infrastructure upgrades and another $1.2 billion on consumer education initiatives, according to the National Association of Broadcasters (NASB).

The government is also deploying AmeriCorps volunteers to assist in  installing the new DTV boxes.

Department of Commerce Secretary Gary Locke said he was surprised to find elderly consumers better prepared for the transition than many of their younger, Internet-savvy counterparts.

"Maybe it's because they (the younger consumers) rely on new forms of media for news and programming and don't care about television anymore," Locke told reporters.

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On the Net:

• DTV Switch

Source: redOrbit Staff & Wire Reports

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