BUMPY RIDE IN RUSH TO DIGITAL CHANGE

In the US, pundits are proclaiming this to be digital television's year after more than two decades of squabbling and bickering worthy of a new TV drama.

This time round though, it's more than just another empty boast. Representatives of the consumer electronic and cable television industries have finally agreed on a new set of regulations on issues such as compatibility, signal carriage and copy protection, a move that is expected to speed up the switch from analog to digital broadcasting. By agreeing on the regulations, the industry will have gone some way in persuading hesitant consumers to purchase high-definition TV sets (HDTV). Although still expensive, prices of HDTV sets are falling rapidly, which should expand penetration beyond the current four per cent of US homes.

Asia, with its passion for the latest technology, is expected to embrace HDTV with open arms. Last December, at the Cable and Satellite Broadcasting Association of Asia's (Casbaa) convention, digital TV was singled out as the hottest industry development for the next decade. Casbaa has forecast that there will be a dramatic growth in the number of households with digital TV from the existing 7.9 million homes in 2002 to 166 million by 2010.

Simon Twiston-Davies, Casbaa's CEO, believes Asia will feel a significant impact in the next 12 to 24 months. "We have already seen rollouts of the service in Taiwan, Korea, Japan and Australia so it will not be from a completely standing start."

That's not to say the transition will be smooth. With its mosaic of regulations and varying stages of market development, the switch-over promises to be a fragmented process. In Hong Kong, Stephen Chan, assistant general manager at Television Broadcast, one of the city's free-to-air stations, believes a decision will be made in mid-2003. The pair will have 18 months to implement the system once a decision is made. "We are lobbying strongly to wait for China to adopt its system but they seem inclined to go with the European system, which in my opinion, would be disastrous," notes Chan. "The success of digital TV will depend on how many people purchase digital TV sets. China will be producing TV sets at an extremely low cost. If Hong Kong adopts the European system, many people will not be inclined to purchase a European TV set because it will be much more expensive."

Starcom Worldwide's US-based vice-president Tim Hanlon believes China will be at the forefront of the digital revolution in Asia and will adopt its own system. "We're already seeing interactive television in Shanghai and Beijing, and it was recently launched in Sichuan province," he says.

China's hosting of the 2008 Olympic Games in Beijing will no doubt accelerate the transition. Says Twiston-Davies: "The success of the World Cup in Japan shown in digital television is a testament to how important it will be for China to have every single event available to watch at the viewer's discretion."

Hanlon reckons the biggest problem that Asian programmers will face is how the country deals with cultural issues. Should stations be creating their own programmes or bringing in more foreign programmes? "Right now, transition to choice in Asia is the biggest hurdle and tackling this issue should be paramount before moving onto the next step."

The other more crucial issue facing not just broadcasters but the marketers that use their services is whether TV commercials will have a place in the digital television era. The digital set-top box - part TV tuner, part computer processor - not only allows for the delivery of hundreds of new television channels, but also features services such as hard-disk drive recording, on-demand video, wireless home networking and real-time, two-way interactivity. Essentially, this set-top box can free TV viewers from the tyranny of the nightly programming grid, and more importantly, allow them to skip over commercials.

Hanlon says marketers will need to develop new methods to advertise their brands. "Advertisers need to look beyond the standard TVC format and consider other creative ways to display their logo more prominently," he advises.

On the upside, he says markets will be able to target a much more direct and interested audience - instead of broadcasting to thousands of viewers with little or no interest in the product. "It will also be a big challenge for a marketer to create a long-form message that viewers may not want to skip through so quickly."

In the US, some companies are already exploring other formats of advertising.

Currently, over five million households in the US have the capability to indicate interest in a TVC with the remote control. "For example, a commercial for Lexus allows viewers to access special video stored on the digital set-top box that contains more information about a promotion for the car," says Hanlon. A number of US cable firms are testing digital set-top boxes to allow advertisers to serve different messages to different households at the same time, maximising effect and minimising waste. Another format is to deliver the same type of targeted messaging within the programme itself. For instance, sports broadcasts and entertainment programmes offer opportunities for national advertisers to digitally insert virtual images into the picture. "I might see an image for Fanta on the soccer field on my TV, while another viewer might see an image for Coca-Cola," says Hanlon.

Twiston-Davies offers another solution: "Being able to skip over TVCs is definitely worrying for many ad-driven networks but some are simply developing set-top boxes that make it impossible to skip TVCs."