Kagan Forecasts HDTV Cable Network Revenues Will Reach $1.8 Bil. By 2010

September 5, 2006

According to a new study from Kagan Research, more than 21 mil. HDTV sets had been sold to consumers at year-end 2005, and at year-end 2006 penetration of HD sets into TVHHs is expected to reach nearly 30%. Just published, ECONOMICS OF HIGH-DEFINITION CABLE NETWORKS forecasts that by 2010 nearly 180 mil. HDTV sets will have been sold to U.S consumers, penetrating more than 81% of TVHHs. "Due to capacity constraints and the fact that the number of HD households remains rather small, the market for HD cable networks is still nascent and by our estimates generated only $182 mil. in 2005. However, we believe this will grow to more than $1.9 bil. by 2010," said Derek Baine, senior vice president of Kagan Research. "While some HD nets are currently producing positive cash flow, in aggregate, HD networks are expected to lose money through 2006 as subscriber numbers and affiliate and ad revenue catch up with programming expenses." According to the new report, MSOs will continue to be put under pressure to add more HD networks. The two major DBS operators, DIRECTV & EchoStar, have added subscribers at an impressive pace and Kagan estimates that at year-end 2006 DBS subscribers will total 29.4 mil., a full 30.3% of the multichannel universe, and forecasts growth of 2.6%/year, reaching 34.2 mil. in 2011. Multichannel Universe, DBS, Cable and Telco Subscribers (2005-2011) 2005 2006 2007 2008 2009 2010 2011 DBS (mil.) 27.4 29.4 31 32.3 33.2 33.7 34.2 Cable (mil.) 65.4 65.6 65.9 66.3 66.8 67.4 68.1 Telco/Other (mil.) 0.2 0.8 1.8 3.2 4.4 5.5 6.5 Total Multichannel HHs (mil.) 93 95.8 98.7 101.8 104.4 106.6 108.7 Other key estimates from ECONOMICS OF HIGH-DEFINITION CABLE NETWORKS include: -- More than 21 mil. HD sets had been sold to consumers at year-end 2005. At year-end 2006, Kagan estimates about 30% of TVHH will have purchased an HD set. -- The number of HD subscribers across DBS and cable platforms at year-end 2005 totaled 5.5 mil. Cable operators had secured nearly 70% of those. -- At $0.84/sub, ESPN HD sports the largest license fee among all HD networks. ECONOMICS OF HIGH-DEFINITION CABLE NETWORKS provides an in-depth look at the financial picture of 25 HD networks in the U.S. with metrics ranging from the number of network subscribers to the average license fee per sub to SG&A and programming expenses. The report also includes 10-year forecasts for digital and HD television sets, HD subscribers for both cable and satellite operators and a technical section that addresses bandwidth capacity issues. For table of contents and more information on ECONOMICS OF HIGH-DEFINITION CABLE NETWORKS go to www.kagan.com/HDCN. About Kagan Research, LLC For over 35 years, media and communications operators, content providers and institutional investors have relied on Kagan Research for thought leadership in media business research. Kagan's consulting, publishing and data services provide exclusive benchmarking data and analysis, market advisories and long-range forecasts for TV, radio, cable, satellite, wireless, movie and sports sectors, as well as informed perspectives on emerging media, digital communications, and Internet technologies. Kagan is one of the world leaders in valuing and appraising media assets. For more information, visit www.kagan.com. Kagan Research is a division of JupiterKagan, Inc. About JupiterKagan, Inc. JupiterKagan, Inc. was formed in 2006 from the merger of JupiterResearch and Kagan Research, two companies providing thought leadership, research and advice in the domain of the media and telecommunications, the Internet and emerging consumer technologies. The company's deliverables include continuous information services (available by subscription), research reports, data, inquiries with research analysts, appraisals, litigation support and consulting. JupiterKagan operates from five offices in the United States, United Kingdom and France. For more information, visit www.jupiterkagan.com.

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