HDTV Cable Network Revenues Will Reach $1.8 Bil. by 2010

Kagan: US. More than 21 mil. HDTV sets had been sold to consumers at year-end 2005, and at year-end 2006 penetration of HD sets into TVHHs is expected to reach nearly 30%. Just published, ECONOMICS OF HIGH-DEFINITION CABLE NETWORKS forecasts that by 2010 nearly 180 mil. HDTV sets will have been sold to U.S consumers, penetrating more than 81% of TVHHs.

Due to capacity constraints and the fact that the number of HD households remains rather small, the market for HD cable networks is still nascent and by our estimates generated only $182 mil. in 2005. However, we believe this will grow to more than $1.9 bil. by 2010. While some HD nets are currently producing positive cash flow, in aggregate, HD networks are expected to lose money through 2006 as subscriber numbers and affiliate and ad revenue catch up with programming expenses.

MSOs will continue to be put under pressure to add more HD networks. The two major DBS operators, DIRECTV & EchoStar, have added subscribers at an impressive pace and Kagan estimates that at year-end 2006 DBS subscribers will total 29.4 mil., a full 30.3% of the multichannel universe, and forecasts growth of 2.6%/year, reaching 34.2 mil. in 2011.

Multichannel Universe, DBS, Cable and Telco Subscribers (2005-2011)

		2005	2006	2007	2008	2009	2010	2011
DBS	(mil.)	27.4	29.4	31	32.3	33.2	33.7	34.2
Cable	(mil.)	65.4	65.6	65.9	66.3	66.8	67.4	68.1
Telco/Other	(mil.)	0.2	0.8	1.8	3.2	4.4	5.5	6.5
Total Multichannel HHs	(mil.)	93	95.8	98.7	101.8	104.4	106.6	108.7

Other key estimates from ECONOMICS OF HIGH-DEFINITION CABLE NETWORKS include: • More than 21 mil. HD sets had been sold to consumers at year-end 2005. At year-end 2006, Kagan estimates about 30% of TVHH will have purchased an HD set. • The number of HD subscribers across DBS and cable platforms at year-end 2005 totaled 5.5 mil. Cable operators had secured nearly 70% of those. • At $0.84/sub, ESPN HD sports the largest license fee among all HD networks.

ECONOMICS OF HIGH-DEFINITION CABLE NETWORKS Publ 20060831