Meeting the Digital TV Deadline

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Savvy electronics retailers are likely to steer consumers toward new TVs when they come in looking for a converter. Some stores may offer credits toward a new TV to consumers willing to forfeit their $40 converter vouchers, Cowen analysts say. Target (TGT) and Best Buy wouldn't comment on their retail strategies, but more TV purchases obviously would benefit manufacturers like Sony, Samsung and Philips.

Some retailers and manufacturers may even benefit as confused consumers seek to replace TVs that already receive digital signals or are connected to a cable service. "The consumers' knowledge is not that clear, so there might be more people who upgrade their TVs," Jorge says.

Another group of companies that could get a boost from the digital conversion includes cable, telecom, and satellite TV providers. Electronics retailers likely will try to bundle added services, such as cable TV packages, to hardware purchases. About 15% of the households affected by the transition will subscribe to a pay-TV service to avoid buying any new gear, Jorge estimates.

Leaving Out the Little Guy

That said, in the face of an economic contraction, some consumers may eschew high-priced deals that include hundreds of channels, gravitating instead toward basic cable packages. That would limit the potential benefit for Comcast (CMCSA), DirecTV (DTV), Verizon Communications (VZ), and others. As many as one-third of consumers with older TVs may simply opt to watch video on computers and chuck the TV altogether, says Tim Herbert, the CEA's senior director of market research. In those cases, "There's not as much urgency to take care of the situation," he says.

Any buying boom also presupposes the conversion goes off without a hitch—not a given. The Community Broadcasters Assn., which represents several thousand smaller stations that offer local programming or rebroadcast larger stations' programs in rural areas, is threatening legal action. Its member stations aren't required to convert to digital transmission. So people with older TVs could still receive those stations' broadcasts after the February, 2009, cutoff. The problem is that TVs equipped with most of the new converter boxes certified by the NTIA won't receive programming from stations operating in the analog format, says Greg Herman, the association's vice-president for technology and an owner of 15 small stations that broadcast in Oregon.

"We are barely surviving," Herman says. "And this blow would probably destroy the industry." Herman is trying to negotiate a resolution that would require the government to post a warning label on converter boxes. Meanwhile, millions of owners of outmoded TVs have some buying decisions to make in 2008.

For a closer look at several analog-to-digital converters, see BusinessWeek.com's slide show.

Kharif is a reporter for BusinessWeek.com in Portland, Ore.