A Dangerous Game

In doing some other research, I stumbled across the following article :

Forrester Research Predicts HDTV Will Fail

While digital television offers a variety of ways for TV manufacturers, broadcasters, and cable operators to make money, high-definition television (HDTV) doesn’t. A new Report from Forrester Research, Inc. predicts that standard definition digital television (SDTV) will succeed where HDTV fails by offering an affordable digital TV experience for consumers and viable business models for TV makers, broadcasters, and distributors.

The benefits of HDTV — high resolution, wide-screen pictures, and six-channel sound — have been widely touted. To deliver these features, the consumer electronics industry has invested nearly $1 billion to create new digital products. But these investments, along with the cost of producing the components to receive and display HDTV broadcasts, will keep the price of HDTV sets at or more than $2000 for another 10 years. As a result, only 1 million U.S. households will own HDTV sets in 2003.

And the date on this article? It was from December 1998. The point of sharing this is not to kick sand on Forrester Research. I almost crossed out the name of the company behind this report; I could probably have found similar predictions from a half dozen other companies. The point is that making predictions about technology is a very risky business.

Just one million HD households in the U.S. by 2003? The record shows that 3.4 million HDTVs were sold in the U.S in 2003, and that doesn’t include units that had been purchased in prior years so the total number was clearly higher than that. And there were tons of HDTVs for sale for less than $2,000 in 2008; even in early 2008 you could buy 42″ models for less than $1,000.

So the bottom line here is that you need to take any market predicitions with a large grain of salt. My recommendation is to focus more on the historical data and the assumptions that the analyst is using to make his or her forecasts. In this case, the prognosticator assumed that maufacturing costs would remain much higher than they proved to be. Competition and rapid growth helped fuel economies of scale, and that helped drive down the costs so dramatically.

But that’s what happens when you try to peer 10 years into your crystal ball.