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No Profit Bonanza Likely From TV Cutoff

3/03/2008 10:24:00 AM Eastern

Dallas — About 30 million TV screens will be affected by the end of full-power analog TV broadcasting in 2009, but that may not be much of a windfall for consumer electronics manufacturers and retailers, according to a report from Digital Tech Consulting.

The report, entitled “The End of Analog TV: The Opportunities and Inhibitors of the U.S. Digital TV Transition,” said the transition will mean a boost in TV reception products from set-top converter boxes to off-air TV antennas, but much of that will be in low-margined gear.

“We estimate that shipments of digital TV reception products will reach a high-water mark this year of nearly 38 million units in all flavors and sizes,” stated Myra Moore, Digital Tech Consulting principal. “Consumers are expected to buy tens of millions of government-subsidized converter boxes, new integrated (and unsubsidized) flat-screen HDTV sets and new products like add-on receivers for personal computers.

“However, this is no bonanza for manufacturers or retailers with most consumers who need to make the transition hunting for an inexpensive converter box,” she warned.

The firm predicts that demand for digital TV reception products will more than double from 2006 levels, now that virtually everyone who watches TV will be watching a model equipped with digital TV capability — either built into a new set or through a small converter box.

“Razor-thin profit margins, unknown consumer demand, inability to truly differentiate a product and a short selling season are also dishing up plenty of anxiety among manufacturers and retailers we’ve talked to,” Moore said.

In addition, the report said that a small percentage of purchasers of flat-screen HDTVs will use off-air DTV signals to view television programming.

“We believe only about one out of three American TV households is now equipped to receive digital TV broadcasts. Obviously that number will grow with the installation of low-cost converter boxes, but most consumers who are moving up to HDTV are also moving up to pay-TV services from cable, satellite, and telephone operators,” Moore said.

The Digital Tech Consulting report offers shipping estimates for set-top boxes, integrated digital TV sets, and aftermarket PC receivers and other digital TV devices in forecast models that stretch to 2012.

Peak sales are expected this year for all types of digital TV receivers. Shipments of TV sets integrated with digital TV tuning capability are expected to grow substantially after the one-time effect of converter-box sales throughout this year and next, Digital Tech Consulting said.

Major manufacturers of digital TV receiving gear are detailed in the DTC report, which also includes estimated per-unit costs for digital TV converter box suppliers. Also forecast are shipments of pay-TV set-top boxes, broken out by digital cable, satellite and IPTV projections.

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