Pay TV the future for HD, study says

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BRUSSELS -- European broadcasters should focus on pay television to drive HDTV rather than advertising-based business models, according to a report by London research group Strategy Analytics.

The report says that the recent closure of two of Germany's HDTV channels has cast a shadow over European hopes for a rapid transition to high definition. It adds that the shutdown proves HDTV still needs to reach a critical mass of content and receivers before it can be considered a self-sustaining business.

"It was always highly ambitious to expect advertising revenues alone to support HD channels in the early years," Strategy Analytics vp David Mercer said. "Significant audiences cannot be built until the market has been seeded with millions of HD receivers -- and this was always going to take a number of years."

German commercial broadcaster ProSiebenSat1 closed its two HDTV channels last month after concluding that audience figures were too feeble. The decision leaves Germany with just a handful of HD channels, most of them only available to pay TV subscribers.

The report finds that just 5% of Europeans who currently own an HD-ready TV are, in fact, watching HDTV channels. In spite of these early difficulties, the report concludes that the number of European HDTV subscribers will grow steadily toward 3.5 million by the end of 2008.

While this may appear a modest achievement compared with other parts of the world, rising ownership of HD-capable TVs and receivers will increase the incentive for broadcasters to expand content offerings over the next five years. By 2012, 20% of all European households will be watching HD channels, the report predicts.

"In spite of the short term challenges, however, we believe that Europe's HDTV transition is still on track," Mercer said. "Providers in other countries, such as France and the U.K., have had early modest success by concentrating on enhancing pay TV packages for premium customers rather than attempting to kick-start a free-to-air HD market."
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