DirecTV Boosts HD As VOOM Prepares for Doom

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New research from tThe Diffusion Group suggests that satellite HD services will boom despite the impending failure of VOOM.

Just as direct broadcast satellite (DBS) video service providers raised the bar with PVRs, expanded satellite HDTV offerings will provoke cable companies to respond in kind. A new report from Dallas-based research consultancy The Diffusion Group predicts that DirecTV’s recent announcement to deploy four new HD-capable satellites over the next few years will spur cable competitors to rapidly increase their HD offerings. At the same time, and despite this new energy among DBS players, upstart satellite and direct-terrestrial-television provider VOOM will likely be reduced to licensing HD content, be absorbed by another HD producer, or declare bankruptcy by year-end 2005.

“With DirecTV expanding its HD offerings with four new satellites, the Company will have the capacity to deliver 1,000 additional local and high-definition channels as well as 150 national high-definition channels,” says Scott Kipp, contributing analyst with The Diffusion Group. “This will put DirecTV in an excellent position to grab a significant portion of the 70 million U.S. households that will be “HDTV-ready” by 2007.”

Conversely, HD upstart VOOM is doomed. VOOM’s recent SEC filing was intended to prepare Rainbow Media (the parent company and subsidiary of Cablevision) for spin-off as a separate company with its own publicly traded stock. The spin-off was originally scheduled for September pending SEC approval. Somewhat interesting was Cablevision’s claim that only by spinning-off Rainbow Media will Cablevision be able to “reverse this trend and grow our customer base quickly and significantly.”

The VOOM service – launched less than one year ago – has attracted only 29,000 subscribers, far short of the 200,000 pledged for year-end 2004. After the company announced price increases and a reduction in equipment subsidies during Q2 2004, subscriptions decreased and churn increased. VOOM posted losses of $36 million in Q1 2004 and $61.6 million in Q2 2004. Q3 2004 losses are expected to exceed $80 million.

In general, DirecTV’s announcement to enhance its HD offerings will prove a necessary competitive impetus, especially among cable operators. As Kipp suggests, “Given the lack-luster diffusion of HDTV to date, the industry must focus on improving (1) the production and availability of compelling content, (2) the accessibility of HD equipment and services at reasonable prices, and (3) awareness among mainstream consumers as to the unique value of HDTV.

TDG’s latest report, "HDTV Service Providers: Competitive Analysis & Forecasts," profiles the various HD services currently offered to U.S. consumers; examines the competitive dynamics underlying service expansion; and forecasts both service adoption and HD technology diffusion through 2008. "HDTV Service Providers: Competitive Analysis & Forecasts" is now available for purchase on the Company’s website, http://www.tdgreserach.com

About The Diffusion Group

The Diffusion Group is a “think tank” of consumer technology analysts charged with providing timely, actionable intelligence designed to best position new consumer technologies for rapid diffusion. TDG is committed to providing market research and strategic consulting services based on conservative, real-world analysis and market forecasts grounded in consumer research. For more information about The Diffusion Group, visit our website at http://www.tdgresearch.com.

Media Contact:

Andy Tarczon

972-731-2553

andy@tdgresearch.com

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