SNL Kagan: More than 71 Million HD Subscribers by 2012

March 25, 2008 World Screen

MONTEREY, March 25: A new
study from SNL Kagan estimates that there will be more than 71 million HD
subscribers in the U.S. by 2012, with cable and satellite HD subscriber
penetration to hit 65.7 percent of multichannel households by 2012, up from
18.8 percent in 2007.

According to SNL Kagan's
newest study, Economics of High Definition Cable Networks, more than one-third of U.S. homes now have HDTV
sets, with that number growing each year. As a result, cable networks will face
increasing pressure to offer more HD content. Since 2003, 74 HD networks have
launched, 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 35mm
film.

The new study 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
networks’ 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,”
said Derek Baine, the senior analyst for SNL Kagan. “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. 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."

Continued Baine: “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-percent CAGR.
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."

—By Irene Lew