In a word, it’s subsidization. Companies make the equipment they give you less expensive or free in exchance for you to sign an agreement which guarantees them money.
If you have a cell phone, you understand this all too well. When you’re ready to sign up for another 2 years to your wireless carrier you exchange your signature on the dotted line for dramatic discounts on the hardware. So, why do I think that HDTVs are headed the same way?
It comes down to adoption. Millions of people have been wooed by the idea of sharp pictures and have upgraded their television on their own. By doing so, they are learning how much regular TV (SDTV) lacks in detail. It becomes a really easy sell for cable companys and telcos once the customer is already looking for a better picture. Even with the impending conversion to digital there are people who will use their converter box and their 10 – 15 year old television. Cable companies can upgrade their bandwith and offer triple plays until they are blue in the face but at some point they are going to need new bodies.
This is where the idea of subsidies come in. A company like Comcast, for example, who has been fighting off AT&T and Verizon (and it’s own customer service issues) is running into a problem Bank of America is currently up against as well. They are in too many markets and while they are ready to serve everyone in the markets they’re in they have to give incentive to get people who may not have ever used their services to try them out. If you remember, Bank of America came up with the idea of trying to give mortgages, and credit cards to illegal US immigrants.
Comcast, and Time Warner are in the same boat but they won’t be able to get some people just by giving a discounted rate for 6 months, or by giving them a gift card if they sign up. They’d be able to tap into a whole new market if they came out with a message like “sign up and get a free HDTV.”
This wouldn’t be like the fiasco that Verizon went through when it said that it would give 19″ televisions to people that signed up for service (has anyone even gotten theirs yet?). Instead, someone would signed for two years, at a higher price or a similar price as other people for a portion of the same services. The goal would be for Comcast to make enough per month per person where it doesn’t matter if they give away a television. Just like cell phones, and netbooks – if they break or if you want to get a new one after a few years you can get what is being given away at a discounted or free rate by signing for another 2 years.
You can hate Comcast all you want, but if you are able to get a free 37″ LCD HDTV you’ll be amazed at how quickly will be able to forgive. With HDTVs in people’s homes they’ll be able to pay extra for HD service, or for DVRs, or a host of other things cable companies use to make money from subscribers. It may be a few years before it happens but it seems like it’s only a matter of time.
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