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For High-Definition Television, Supply Must Drive Demand

OYSTER BAY, NY, Aug. 23, 2005 – High-definition television has been available for some time now, but sales have not been growing at astronomical rates compared to other emerging digital technologies. Why haven’t consumers jumped on the HDTV bandwagon with more enthusiasm?

According to a new study from ABI Research, the HDTV market is, and will remain for some time, an exercise in supply driving demand. “The Future of the High Definition Television Market” examines key drivers, enablers and hurdles for the future of the HDTV market, with a focus on consumer electronics vendors.

“Does an upgrade from standard television to HDTV provide the same kind of enhanced experience as going from black-and-white to color?” asks Vamsi Sistla, the company’s director of residential entertainment technologies. “Or is it more like going from real-time viewing to the time-shifted experience of personal video recorders?”

The former, he points out, is a purely aesthetic experience, while the latter changes consumers’ viewing habits. Upgrading to HDTV, Sistla believes, is like moving to color, but not even as dramatic. “Most consumers, having lived happily with standard TV, are not going to pay a hefty premium to move to HD today. Those who will upgrade for picture quality alone are a niche group, especially as long as the amount of available high definition programming remains small.”

And why is there relatively little HD content? Because of the small audience base. This “catch-22” situation is well-understood, says Sistla, but the fact remains that “critical mass” for the HDTV market will only arrive when the equipment becomes sufficiently commoditized to drive prices down, and conventional TVs start to fade from the market. Only when consumers view conventional television as having reached its use-by date will large numbers of them be prepared to spend the premium for HDTV.

What does this mean for the markets? Vendors must simply persevere and produce as many sets as possible, waiting for the day when supply will truly drive demand.

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Founded in 1990 and headquartered in New York, ABI Research maintains global operations supporting annual research programs, intelligence services and market reports in automotive, wireless, semiconductors, broadband, and energy. For information visit http://www.abiresearch.com, or call +1.516.624.2500.

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