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Digital TV on schedule
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March 31, 1998: 7:04 p.m. ET
Broadcast, cable chiefs look forward to adoption of HDTV, digital cable
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NEW YORK (CNNfn) - Broadcast and cable television will begin to adopt elements of the digital format by the end of the year, five of the nation's most powerful media executives said in a panel discussion Tuesday.
At the "Big Picture" media conference hosted by Schroder & Co. and Variety magazine, Mel Karmazin, chairman of CBS Station Group, said he believes CBS will broadcast in high definition format at some time during the fall 1998 lineup. Meanwhile, Tele-Communications Inc. (TCI) president Leo Hindery Jr. said that over one million customers will have cable set-top boxes with digital capabilities.
Yet broadcasters such as ABC, NBC and CBS face the greatest challenges of the digital transformation, which will greatly increase the capacity and likely further fragment the television industry. Fragmentation caused by the evolution of cable television already has resulting in a substantial loss of ratings for the major broadcast television networks.
"The platform has now been established. The networks will need to come in and morph," Hindery said during a key panel discussion.
The promises echoed similar rhetoric from previous years. Cable officials promised 500-channel capacity, for example, when TCI unveiled its $29 billion merger with Bell Atlantic in 1993. During the panel discussion, Hindery offered an apology for the premature predictions of the past.
"I apologize for the screw-up. We broke a lot of hearts in the process," Hindery said.
But, unlike previous years, real changes already are underway to help launch a new era for the cable industry. General Instrument Corp., the leading manufacturer of cable set-top boxes, already has shipped one million digital set-top units as of March 30.
And GI (which recently changed its name from NextLevel Systems Inc.) plans to introduce by the end of the year its eagerly awaited next-generation device known as the DCT-5000 -- a set-top box with Internet capabilities thanks to a built-in cable modem.
"I think the set-top box is convergence," said Barry Diller, chairman and CEO of USA Networks Inc. "It is the most exciting development ...it will be the topic for the next five years."
However, broadcast officials represented on the panel were quick to scrutinize the upcoming evolution.
"The issue in the near term is these terms aren't all that relevant to consumers. . . . The reality is though if you don't have a set it's not going to be all that much different," said Bob Wright, president of NBC, a unit of General Electric Co.
Broadcasters face a particular challenge with the changing landscape. With an industry that has always been constrained by capacity, the new challenge lies in filling up the excess space with programming that can effectively reach a new, highly targeted audience.
But even though some cable and broadcasting networks will argue that advertisers will be able to more closely target their audiences, ad revenue still will suffer as ratings drop off.
"Ultimately, the fragmentation is going to make it tougher for them [broadcasters] to hold on to their share," said Ed Atorino, media analyst at Wasserstein Perella.
And the new constraints will affect not only broadcasters but also so-called "general purpose" cable networks such as USA Networks Inc., Time Warner Inc.'s TNT and TBS.
"The negative impact on cable networks will be more than on broadcast networks," said Dennis McAlpine, analyst at Josephthal Lyon & Ross.
The problem, McAlpine explained, is those earliest adopters of cable will also likely adopt new technology such as real-time video-on-demand, which translates to lower ratings for convention programmers.
"It will diminish the share of the general purpose cable networks," he said.
According to the National Cable Television Association's 1997 year-end report, more than 10.3 million cable customers currently are capable of receiving digital services.
And several officials acknowledged that it will take a while for digital television to reach a mass market.
"People forget it took 10 years for color (TV) to get across the country," said Howard Stringer, president of Sony Corp. of America. 
-- by staff writer Robert Liu
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