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http://yahoo.reuters.com/news/artic...1-22_21-04-50_N16382833&type=comktNews&rpc=44

By Yinka Adegoke

NEW YORK, Nov 22 (Reuters) - Cable and satellite television providers will fight for upscale subscribers on a new battlefront this holiday season: The local electronics shop.

Pricey flat-screen, high-definition televisions are expected to be one of the hottest items in the United States this season, when an estimated $21 billion will be spent on consumer electronics products alone.

Cable and satellite companies regard the advanced functions of the new TVs, such as on-demand interactive services, as essential to their efforts to drum up new revenue.


The more upscale customers interested in such services are also viewed as less likely to switch providers.

"There's a very strong correlation between higher end customers and lower churn," said Jon Gieselman, senior vice president for advertising at DirecTV Group Inc. (DTV.N: Quote, Profile, Research).

And because national retailers such as Best Buy and Circuit City display HDTVs using satellite service from DirecTV or EchoStar Communications Corp. (DISH.O: Quote, Profile, Research), analysts say that relationship alone could give satellite companies an edge over rival cable operators.

"If this is a flat-panel Christmas -- and it looks like it's going to be one -- every time you go into a store the sales person is going to say: Have you thought about getting DirecTV or DISH?," said Todd Mitchell, an analyst at Kaufman Bros.

Pacific Media Associates forecasts that more than 3.2 million HDTV sets will be sold in the United States in the fourth quarter of 2006, over twice the number sold a year ago. But when customers plug in their new high-tech TVs, they may not realize they need upgraded service to get the sharp pictures over a full screen that looked so good in the store. Continued...

There also is an incentive for retailers and HDTV makers to promote a service because it reduces the number of disappointed customers returning sets, analysts say.

According to a recent Leichtman Research survey, as many as one in six U.S. homes has at least one HDTV set. But nearly half of those do not receive HD signals through their television provider.

CABLE READY

But cable operators, who have attracted record numbers of new subscribers recently by combining telephone, Internet and television service, say the battle is far from over.


"There are a few times in a customer's life to consider who their video provider is -- maybe when they move to a new home," said Page Thompson senior vice president of video services at Comcast Corp. (CMCSA.O: Quote, Profile, Research), the largest U.S. cable company.

"For a customer right now, when they buy an HD (TV) set is a time when they make that evaluation."

With that in mind, Comcast and other cable operators are working more closely with local and national retailers to explain to consumers how to sign up for high-definition services. Some of them are even offering free HD services plus extra features. Comcast provides more than 100 hours of HD on-demand programming, while New York-based Cablevision Systems Corp. (CVC.N: Quote, Profile, Research) advertises HD as "free" for its digital cable customers.

Yet DirecTV and EchoStar's DISH network see HD as important in the battle for subscribers because they cannot provide the same kind of Web and phone services cable operators offer.

DirecTV has long-standing ties with retailers, including Best Buy Co. Inc. (BBY.N: Quote, Profile, Research) and Circuit City Stores Inc. (CC.N: Quote, Profile, Research) and is now working with HDTV set makers such as Sony Corp. (6758.T: Quote, NEWS, Research) and Samsung Electronics Co. Ltd <005930.K> to explain the service to customers.

But that is no easy task.

Phil Abram, Sony vice president of TV marketing in the United States, said making consumers aware they need an HD service is a major hurdle.

"It's the one thing (about) which I think consumers are getting the most confused," he added.