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Who's Really Watching HDTV?

In the nine years since the first high-definition TV sets hit store shelves, most things HD have gotten easier. Production and transmission equipment have gotten cheaper and better, and most major programmers have launched high-def versions of their channels. Prices on consumer HD sets have dropped, and major cable and satellite operators offer an array of HD channels.

But one thing hasn't gotten much easier: figuring out exactly how many people are actually watching HDTV programming.

A review of research from such groups as the Consumer Electronics Association (CEA), TV ratings giant Nielsen Media Research, TV programmers and analysts indicates that in late 2007, there are still wide differences of opinion on the size of the HDTV viewing audience. Nielsen released its first report on HDTV penetration last month, but its numbers were lower than estimates from major cable programmers.

Despite the uncertainty two things seem clear: HDTV viewing is not quite yet a mass-market phenomenon, with less than 20% of Nielsen's 112.4 million U.S. TV households watching HDTV today—perhaps 18 million homes in total. And a significant portion of HDTV set-owners still aren't watching HDTV programming, either because they simply bought them to watch DVD movies in widescreen, or because they think they're getting HDTV when they're not. That suggests that the HDTV audience could quickly double if cable and satellite operators are successful in up-selling subscribers to their high-definition services.

Nielsen found that only 11.3% of the 112.8 million U.S. TV households, or some 12.7 million homes, are currently equipped with an HD television and tuner (which could mean an HD set-top or built-in ATSC tuner) and receive at least one channel of HD programming (it calls them “HD receivable”). Nielsen found that another 2.4% of homes—2.7 million—have an HD set and tuner but don't use them to watch HD (it calls them “HD capable”).

Dueling Estimates

That's lower than estimates from major cable programmers like ESPN and Discovery, which say that digital set-top data indicates that around 15.5 million homes receive high-definition programming from their cable, satellite or telco provider. The set-top number doesn't count homes that watch local HDTV broadcasts through over-the-air antennas, which might represent another one or two million homes. That would place the total HDTV viewing universe closer to 17 or 18 million homes, for a penetration rate of around 15%.

Nielsen's numbers on both HD viewing and set penetration are also lower than estimates from industry analyst Bruce Leichtman, who has been tracking HD penetration for the past five years. Leichtman says about one-quarter of U.S. households own at least one HDTV display, which would equate to some 28 million homes, and about 17 million homes are watching HDTV.

Clint Stinchcomb, executive VP and general manager, Discovery Emerging Networks, thinks Nielsen's numbers are low, both for its estimates of overall HD penetration and the penetration of Discovery HD Theater, which he says Nielsen calculated at 10 million homes. While Discovery hasn't released a subscriber figure for Discovery HD Theater, it was one of the first HD-only networks and is widely distributed on HD programming tiers.

Stinchcomb thought it was strange that Nielsen didn't formally release its estimate of the number of homes that simply have high-definition displays, with or without a tuner. That number, which Nielsen says is about 21%, or some 23.6 million homes, is more relevant to Stinchcomb as it represents the number of households that could potentially watch Discovery's HD offerings by hooking up a hi-def set-top.

Artie Bulgrin, senior VP of research and sales development for ESPN, also found it odd that Nielsen didn't release the larger HD display number. “They came out with the homes receiving HD programming, but what they failed to report is the number of households with HD sets,” notes Bulgrin. “So you can accuse them of understating the number of potential HD homes out there.”

Nielsen now says it will include that estimate in its next HD report due in late January or early February, based on client feedback.

“The clients, who had not previously had a demand for that number, said they would like to see the number,” says Nielsen spokesman Gary Holmes.

Otherwise, Bulgrin thinks that Nielsen's numbers are fairly accurate, but perhaps a few million homes low on the HD viewing side. ESPN's own research indicates that 23% (25.9 million) of U.S. TV households have HDTV sets, but only 15% (16.9 million) are receiving HD content.

Very Confused Viewers

The disparity between HD viewing and HD set penetration is also apparent in research from the CEA, which is generated by a combination of data sharing with manufacturers and consumer surveys. CEA thinks the penetration of HDTV displays is much higher than Nielsen, Leitchman or ESPN research indicates, reporting that in July 2007 it stood at 32%, or some 36 million homes. But CEA says only 44% of HDTV owners actually receive HD programming, which would equate to about 15.8 million viewing homes—in line with others' estimates.

Consumer confusion could help explain the gap. According to Leitchman, 20% of HDTV set-owners think they're watching HDTV programming when they're not, and only 41% of HDTV set-owners were told how to get HD programming when they purchased the set.

According to ESPN's research, about half of the homes with HDTV sets that aren't receiving HD content don't realize they're not watching HDTV. Says Bulgrin. “People think if they have a [standard-definition] digital set-top and a plasma set, then they have HD.”

The other half of homes that don't receive HD content know they don't have it and don't care, says Bulgrin, either because they bought a widescreen display to watch DVD movies or simply for aesthetic considerations, such as mounting a sleek flat-panel on the wall.

One of the ironies of current HDTV penetration research is that no one seems to have a good estimate of the number of households watching HDTV via over-the-air signals, although it is broadcasters' switch to a new digital television standard that started the industry's overall move to HDTV. Leichtman estimates that 4% (perhaps 1.1 million) of HD households are watching HD through over-the-air broadcasts.

Says Bulgrin. “When one in five or one in four homes in the TV universe is affected by this, then it starts to make a difference to advertisers.”