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Display Prices Down; Content Costs Up?

January 3, 2006 | Author: Ibex Marketing

EchoStar announced on New Year’s Day that they were dropping Lifetime’s channels from its DISH Network satellite service after 10 years. According to the press release from EchoStar, Lifetime “demanded an exorbitant price increase of 76 percent” and Echostar responded by saying “NO to Lifetime’s strong-arm tactics.” Lifetime’s Web site doesn’t discuss the contract or the increased fees, stating that EchoStar “unilaterally pulled Lifetime Networks off the air” which they claim is “just like they’ve done to other networks many times before.”

Now, I’m not going to try to get in the middle and figure out who’s right in this dispute, but there’s a lesson in all of this. The prices of digital displays are indeed falling, but that’s only part of the equation: Display + Signal + Content = HDTV. The cost of producing the content is rising, at least while producers have to retool to accomodate higher resolutions. (This is offset somewhat by the efficiencies offered by digital production, but there are limits to what can be saved there.) And the cost of delivering the signal is not going down; energy, maintenance, and expanding the infrastructure are cost more as time goes on.

The future is filled with questions. How many people are willing to pay $1,000 per year or more for their HD content? Will subscription services such as cable and satellite continue to dominate, or will terrestrial broadcast become more attractive again as monthly costs rise? And will IPTV delivered as a “triple-play” with phone and Internet service shift the balance by lowering total costs? Will the high cost of traditional programming open the door of opportunity for lower-cost independent productions? What will we be watching, and who is going to pay for it?

Stay tuned!