The Digital Cable Dividend

by Dave Zornow

The dawn of digital cable TV has arrived. Millions of cable households have a myriad of TV programming choices to satisfy their personal tastes and interests. Electronic program guides have caught on as "one of the best surprises about digital cable service," according to CTAM. Nielsen says that these upscale, Internet ready households watch more cable and premium pay TV.

For the most part, a digital customer is a happy customer, according to CTAM's 1999 Digital Cable TV Customer Satisfaction Survey. Six out of ten digital cable subs say they are completely satisfied with their service, and their satisfaction grows and they learn and use the features of digital cable. Almost nine out of ten say they plan to continue to subscribe in the future.

The Digital Profile
The first wave of digital cable households are more upscale than their analog counterparts, live in larger households and are more likely than most to have a PC with Internet access at home. Nielsen's November 1999 analysis found most digital cable TV households clustered in A & B counties - the most populated / most homes per mile communities in the country. More than eight out of ten DC TV households live in an A or B County - a higher percent than analog (73%) and Total U.S. Homes (70%). This is in stark contrast to the composition of DBS homes where four in ten hail from A/B Counties and 59% live in the more rural C&D counties.

Digital homes are also more likely to have more money, family members and kids. Half of all DC TV homes say they earn $50,000 or more annually placing them ahead of analog (44%) and the Total U.S. (41%). Nielsen says this group is 28% more likely than the average household to earn $70,000+ a year (an index of 128 to the Total U.S.). These numbers are an almost exact match for the digital but un-wired world: 49% of DBS homes earn $50,000+, and their 133 index for $70,000+ tops digital cable. Digital cable households have more family members (more than half have 3+ people living at home compared to 44% for analog) and more children (49% have one or more children younger than 18 compared to 37% for analog).

Watching What They Watch
Nielsen's aggregate analyses of all digital cable households show that digital cable homes follow the viewing patterns of premium pay: the more you pay, the more you are likely to watch. In November 1999, Total TV household viewing (HUT) for DC TV was 32% higher throughout the day and 12% higher in prime time. By comparison, analog cable runs five percent higher for Total Day viewing and four percent higher in primetime.

Although digital is purely a cable marketing initiative, but Nielsen's November 1999 findings show that a rising digital tide may lift all of TV boats. Digital cable households watch more TV than analog homes, including broadcast, cable and premium pay viewing. DC TV watch six percent more broadcast, 34% more cable and 253 percent more premium pay TV. A higher broadcast network number isn't just a odd creation of the November 1999 sweeps: Nielsen found that DC households watched 23% more network TV in January 1999, a non-sweeps period. Interestingly, this is one place where DBS and Digital cable diverge. Where in most instances DBS viewing patterns parallel digital cable, DBS homes viewed network TV eight percent less than analog homes, two percent less of total cable and 126% more of premium cable.

Nielsen isn't providing any ratings for individual digital cable networks, but Discovery Senior Vice President of Digital Networks Charley Humbard doesn't think that a lack of ratings will make or break these new services. "I don't think digital networks will ever be measured by Nielsen. Although our ad sales currently are doing quite well, the future is about doing transactions and getting consumers to interact." Humbard believes the future success of digital programming hinges not on the size of the audiences but on attracting loyal viewers who advertisers will covet because of their willingness to conduct transactions.

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