Digital Customers $pend More on Cable Bills
Gartner study shows choice, movies and quality drive customers' choices
By Alan Breznick
While only in 2 million homes so far, digital cable is already making its presence felt, according to the latest consumer study.
The new study of 524 households, conducted in May by GartnerGroup's Dataquest division, found that digital cable subscribers are spending far more on their cable bills each month than other cable customers. Digital cable households are laying out an average of $57.70 a month for their service, as opposed to $41.10 a month for analog cable subscribers interested in moving up to digital and just $36.50 a month for ordinary cable customers with little or no interest in upgrading.
In particular, the study revealed, digital cable subscribers are spending heavily on premium movie channels and pay-per-view (PPV) events. About 80% of digital cable homes take at least one pay movie channel, as opposed to just 32% of cable subs with little interest in digital. Some 72% of digital cable subs have sampled PPV, in contrast to just 25% of those averse to digital.
Moreover, digital cable subscribers watch a whopping 130% more premium movies than average cable subs. Even those considering the switch to digital view 45% more premium films than average cable customers.
"The business model for digital TV continues to be increased buy rates for movies," said Harry Hoyle, VP-research for Dataquest. The prospect of increased video entertainment, he said, is "a tremendously powerful purchase motivator" for consumers.
But, unlike the digital satellite TV business, digital cable is not yet cutting into the lucrative video rental market. The study found that digital cable subscribers still rent an average of 2.7 videos a month, about the same as analog cable customers interested in switching to digital.
Mark Snowden, a Dataquest senior analyst, pointed out that digital cable, for all its increased program offerings, still can't match the PPV smorgasbord of satellite TV. He noted that the DBS providers, especially DirecTV Inc., provide a "much broader array" of PPV programs.
Similar to surveys of DBS customers, the Dataquest study found that increased choice is the biggest reason for taking digital cable. About 60% of digital customers rated more choice as their primary factor for subscribing, as opposed to 12% crediting clearer picture and sound and 9% citing overall value.
A scant fraction of survey respondents, or 3%, attributed their digital plunge to a greater number of sports networks. But those primarily interested in more sports showed a strong willingness to pay extra for the action, particularly pro football.
Not surprisingly, digital cable subscribers generally watch a great deal more TV than average cable customers. Digital households especially tune into more dramatic, family and children's programs than average cable homes.
But digital cable subs watch less broadcast TV and basic cable than their average cable counterparts. They also view fewer newsmagazine shows than average cable subs and, thanks to their advanced electronic program guides, use printed TV listings far less often.
In addition, the study revealed, digital cable customers are generally spending much less time than before playing video games and listening to music on the radio, CDs or cassettes. However, while 17% are spending less time on the Internet, slightly more, or 22%, are actually going on the Web for longer stretches.
Dataquest researchers saw a sizable range of interest among digital cable subs in such emerging interactive TV services as electronic mail, Web surfing and home shopping. This could bode well for such existing or proposed interactive services as WebTV, Wink, WorldGate, ACTV, AOL TV and U S West's WebVision.
But few digital subs showed much enthusiasm for actually paying for these services, no matter how convenient they seem to be. As a result, Snowden and Hoyle predicted that interactive services will have to piggyback onto entertainment services to get into consumers' homes.
"We're very bullish on the prospect of people using interactive services over time," Snowden said. "The problem is that people won't pay for them."
Similarly, digital cable subs indicated great interest in the new breed of personal video recorders (PVRs), which permit viewers to pause and rewind TV shows in progress and store programs much easier than conventional VCRs. That's promising news for companies like TiVo Inc. and Replay Networks Inc., which are starting to market such devices.
But interest dropped sharply once survey respondents considered the $500 and higher prices that TiVo and Replay are charging for their standalone set-top boxes. Digital subs expressed far more willingness to spend perhaps $10 a month for a PVR service bundled into a cable or satellite TV set-top, much as EchoStar Communications Corp. plans to launch with WebTV Networks this fall.
(July 5, 1999)
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