Sam Sewall, Research Executive, The Nielsen Company

SUMMARY: On June 12, 2009, the Federal Communications Commission (FCC) mandated that all U.S. based television signals must be transmitted digitally. The great majority of U.S. households (97.5%) were prepared for the digital transition in the week prior to the power turn-off. Nielsen data shows unprepared homes were more likely to be minorities, younger, lower income, and were less likely to have Internet access. Most homes acquired a digital converter box to make their television ready for the change.

On June 12, 2009, the FCC required all high-power analog U.S. television stations to turn off their signals and move to a digital-only transmission. A review of the process—and progress—as television households became ready for the analog shut-off reveals the audience impact on stations that shut off their analog signals.

Ready for the switch
By the time the June 12 deadline arrived, most U.S. homes were ready for the conversion to digital. There was a sharp decline in the number of completely unready homes (just 2.5% of U.S. households) for the digital transition in the week leading up to the digital transition. And as of October 4, that number was reduced to 0.5%. Those homes that were completely unready were more likely to be African American, Hispanic, Asian, younger, lower income, and were less likely to have Internet access.

By the end of August, almost three-quarters of unready homes made the switch to digital TV via a digital converter box, 18.2% acquired a cable subscription, and 7.5% received DBS (direct broadcast satellite). The lower income status of completely unready homes likely led them to the federally funded converter box coupon program instead of subscribing to cable or DBS.

Unready and hardly used
In general, unready homes represented just 1–2% of total television tuning before the June 12th transition. Television sets that were not ready for the digital transition were viewed about one-third of the time compared to ready sets. Unready sets were viewed 1.5 hours a day on average, while ready sets were viewed 5.1 hours per day. And in the week leading up to the analog shut off, almost 60% of unready sets had no television tuning at all.

Unready sets were typically found in rooms that are not focal points of television viewing, such as secondary bedrooms, kitchens and other locations. The location of these sets corresponds to the fact that they were used less for television viewing.

Surprisingly, the age profile of unready homes skewed younger than Total U.S. figures. More than half of viewers from completely unready households were under the age of 35—a stark comparison to Total U.S. statistics, where roughly one-third of consumers make up this age cohort. And unready homes were less than half as likely to be over 55 years as the audience in Total U.S. homes.

Audience impact
In total, TV stations that transitioned to digital only experienced an 8% share decline immediately following the analog shut-off. Half of that decline is attributed to a loss of tuning from homes that were completely unready for the digital transition. Additionally, 13% of the prior audience to these stations came from homes with at least one unready set and one ready set. It is likely that the stations lost some audience from these partially-unready homes as well.

Stations that changed channel positions from UHF (ultra high frequency) to VHF (very high frequency) were more impacted, showing a 13% share decline. This change in channel position created challenges in household receivability, since homes with “digital” antennas—which were only capable of receiving UHF signals—were not able to receive VHF digital signals and homes could not receive these channels without performing a re-scan of their converter boxes.

Audience loss from unready set tuning was higher for Spanish-Language broadcast networks than for English-language networks. Immediately prior to the analog shut off, 3% of all people viewing English-language national broadcast networks came from unready sets. That figure tripled for Spanish-language broadcast networks, where 9% of the ratings came from unready sets.

Seasonality also impacts audience
These audience declines were also likely impacted by seasonality—not just the digital transition. Nielsen data shows that TV viewing typically goes down in the summer months. A review of prior years confirms this dip in viewing levels at this same point in the television season.

For the first two weeks following the analog shut-off, transitioning station shares were 8.4% lower than they were in the two weeks prior to transition. In the third and fourth week following the transition, the shares to transitioning stations were 9.3% lower than the pre-transition period.

Based on historical seasonality trends, there is an expectation that stations would have experienced share declines of about 2.4% to 3.6% in the weeks following June 12, 2009. Therefore, the additional 4.1% to 6.1% decline actually experienced in the two weeks following the digital transition is approximately the range of share decline attributable to the digital transition. As the date moves further out from the transition, more of the station declines are attributable to seasonal trends, as the chart below indicates.

The digital future
With super sharp high-definition programming and the ability to show multiple standard definition digital programs simultaneously, digital programming offers many advantages over analog television for viewing broadcast TV. Homes are now capable of receiving more channels than ever before. And a review of pre- and post-transition audience shares to non-simulcast digital sub channels following June 12 show an increase—albeit modest. Nielsen will continue to track growth in these digital sub channels.

As the analog shut-off date becomes more distant, the trends in 2009 are moving closer to the 2007 and 2008 trends—a clear indication that homes are adapting to the new digital landscape and continuing to find their TV content.

% Of Homes Completely Unready For DTV

For additional information including a market-by-market breakdown, download Nielsen’s latest DTV media release.

As of February 2009, slightly more than one-third of American TV homes had at least one HDTV, a marked increase from November 2008, when 29.2 percent of homes had one, and a huge leap from February 2008 when only 19.3 percent of homes had one. Indeed, a separate Nielsen report found that HDTVs were the single most popular home entertainment system purchases during the holidays. Asian households had the greatest penetration – 41.8 percent – while African-American homes had the lowest at 25.9 percent.

Where are people putting their new TV sets? Nearly two-thirds are located in common areas such as the living or family room. In homes with more than one HDTV, the second set is usually located in a master bedroom. This switch to HDTV doesn’t necessarily mean that households are ditching their old standard sets; they are simply re-locating them to other rooms such as bedrooms and the basement, and may use them for a dedicated purpose, such as video gaming. Overall, the average U.S. household now has 2.6 TV sets.

“It’s clear that despite the current economic climate, HD remains on course to become the benchmark in TV viewing. As prices of HDTVs continue to fall — a trend that might accelerate in the current environment — and circumstances such as the digital transition create new opportunities to promote the sets and programming, HDTV will continue to gain a greater foothold in U.S. television homes,” said Steve McGowan, Senior Vice President, Insights and Client Research Initiatives, Nielsen.

Click here to read the full Nielsen HD TV report.

Read Nielsen’s complete media release

In 2005, Congress mandated that television stations switch from analog to digital signals in 2009. The purpose of this switch was to increase the efficient use of the spectrum, to expand consumer choice for video programming, and to increase the amount of spectrum available for public safety and other wireless services.  In addition, Congress was able to raise nearly $20 billion by auctioning the analog spectrum that has been used for broadcast television.

The switch to all-digital television broadcasting, which was originally scheduled to occur on February 17, but which could be postponed four months, is arguably the most significant change in television since the introduction of color.  It means that every household will have to get ready for these new transmissions. Since the mandate, broadcast stations have invested billions of dollars to upgrade their facilities and towers to comply.  Networks and cable and satellite operators have built infrastructure to support the enhanced capabilities of the digital world.  And tens of millions of Americans have bought new televisions, signed up for cable or satellite transmission or acquired digital converter boxes.

Nielsen’s role in digital transition has been two-fold:

1) to provide the television industry, policy-makers and local communities with information about how ready television households are for this transition, and

2) to make sure we are ready to measure television broadcasting when it moves to digital transmission.

Education

Nielsen is in a unique position to understand how prepared the country is for digital transition.  We have ongoing relationships with more than 35,000 households (or “Nielsen families”) that form representative samples from which we derive the TV ratings.  Each home in the sample has a Nielsen meter attached to every TV set that collects viewing data 24/7.  That means that we are able to identify every television set in these households and whether or not it is ready for DTV.

Nielsen has developed reports and analyses that help clients understand what is happening, beginning with the basic dimension of how many households are completely unready and at risk to lose access to television.

At this point we estimate that about 6.5 million households are not prepared for the digital transition.  We find that the level of un-readiness falls disproportionately on young, African-American and Hispanic families. For example:

• Overall, 5.7 percent of American families are unprepared.

• 9.9 percent of African American families are unprepared

• 9.7 percent of Hispanic families are unprepared

• 8.8 percent of young families (age 18-34) are unprepared.

Nielsen has been sharing key parts of these reports with government and local leaders so that they can make decisions based on the state of the U.S. readiness.  These activities have included:

• Briefing members of Congress, both one-on-one and in committees.

• Sharing data with ourAfrican American, Asian-Pacific American and Hispanic/Latinoadvisory councils,so that they can use it to educate their clients and communities.

• Conducting extensive media outreach – first monthly and soon bi-monthly – on all issues related preparedness.

Back Office Preparation

To ensure that we are ready for the challenge, Nielsen has been actively preparing for the digital transition for years. Three years ago we began installing new digital meters in households.  This Active/Passive or A/P meter was designed and patented specifically to measure the new digital world.  We have surveyed clients about their plans and shared best practices to help prepare them for changes Nielsen has made, including new encoding methods that enable our meters to identify what is being watched.

Now as the transition date approaches, we are ready.  We’ve recently provided very detailed information to clients explaining how we will handle every aspect of the shift, including:

• We have upgraded our technology in the 800 sites that monitor television programming around the U.S.

• Our Statistical Research department has prepared procedures to ensure that our samples remain representative after the transition and that we have a process in place to remove households that do not switch to digital TV within a certain period of time.

• We have postponed all vacations for our field staff during the period before and after the transition so that they can install meters to new TV equipment that our sample homes buy as the transition approaches.

• Bilingual staff is also being reassigned as needed, since we know that Hispanics are less prepared than non-Hispanics. Nielsen will deploy staff to areas where there is the most potential for visits.

The transition to digital television has been a huge undertaking by the entire television industry and Nielsen has played a critical role in making sure the shift is as smooth as possible.  We will be ready for the transition regardless of what date Congress sets for the switch.

With the nationwide transition to digital TV in the U.S. little more than one month away, 6.8% of U.S. households remain unready for the switch to all-digital broadcasting, according to Nielsen.

Nielsen Wire recently spoke with Patricia McDonough, SVP of Insights, Analysis and Policy, Nielsen, about the company’s efforts to accurately measure TV viewing following the February 17 digital transition.

Nielsen Wire: What is Nielsen doing to prepare for the transition to digital TV broadcasting?

Patricia McDonough:
We are planning for a busy post-holiday season in which we expect many unprepared households to purchase new equipment.  Our field staff will be ready to visit these homes and make necessary connections to our meters.   We plan to have our field staff strategically located near our unprepared sample homes to be able to quickly respond to changes to equipment and service.

Nielsen’s dedicated digital transition team is examining every aspect of our television audience measurement process to prepare for the February 17 transition.  The team has coordinated efforts across the company from establishing new guidelines for our field staff to deal appropriately with questions from sample households, to providing clients with assistance understanding what will be necessary to ensure proper audience crediting.

We are also working with our clients to finalize the details of how we will deal with the days immediately following the transition, when some disruption may occur. That includes developing rules to deal with sample home viewing changes caused by the introduction of new equipment needed to make homes digitally ready.

The bottom line is that Nielsen is not in the business of predicting what the ratings will be; our primary responsibility is to report what is being viewed on television.  To that end, we do believe we are well prepared to provide audience estimates that will provide a realistic view of how people are watching television before, during, and after the switch to all-digital transmission.

Nielsen Wire: How will the transition to digital broadcasting affect Nielsen’s TV ratings?

Patricia McDonough:
To some extent, that remains to be seen.  Nielsen’s extensive preparations for the digital transition make us well positioned to measure and report viewing after February 17.  In the best case scenario, every household that is currently unprepared will take steps necessary and there will be no interruption.  In reality, that is unlikely — though Nielsen expects the majority of households to be ready.

Nielsen Wire: Will homes without digital converters still be counted as part of Nielsen’s TV panel?

Patricia McDonough:
Nielsen has always had rules for how long we can keep a sample home if they no longer have television.  We are reviewing those rules and are discussing with clients how they should be applied during the transition to digital TV.

If a sample home is no longer able to receive signals following the transition, one of the key factors affecting whether or not they stay in Nielsen’s panel will be their plans.  If a sample household advises Nielsen that they will make arrangement to become a working TV home again, we will work with them.  But if that home tells us they have decided to do nothing, they will likely be replaced.

Nielsen Wire: Which stations are affected by the transition: broadcast, cable, PBS?

Patricia McDonough:
The potential changes associated with the digital transition affect all players.  For broadcasters, it is vital that those households that rely solely on over-the-air signals make appropriate preparations.  By definition, these homes currently do all of their TV viewing via broadcast television.  If they purchase a new TV set or a digital converter box, broadcasters can maintain that advantage of being their sole provider of television information and entertainment.  If a household chooses to connect to cable, satellite, telco video offerings, or another source that would open new opportunities for viewing cable networks that were previously unavailable to that household.  As such, there are potential upsides and downsides for broadcast and cable networks alike.

Nielsen Wire: Are there other continuing challenges related to the digital transition that Nielsen will be tackling in the next year?

Patricia McDonough:
The media landscaping is continuously evolving — as such, there are always new challenges in measuring and reporting media consumption.  Nielsen’s job is to anticipate these and develop tools to accurately track consumers’ media habits.

One of the most important current trends is the use of Internet and mobile devices to watch television.  Nielsen’s clients need to know how all of these screens contribute to their total audience, and we working hard to integrate our resources to provide those answers.

As the digital transition approaches, stay tuned on Nielsen Wire for information and preparedness updates.

More at the FCC’s DTV.gov website.

Non-Hispanic households continue to be more ready for the transition than Hispanic households, but the rate of Hispanic readiness is picking up. After seeing no change in unready Hispanic households from October to November, that percentage dropped from 12.4% to 11.5% in December.

Younger households remain the least ready, but this month has seen their strongest monthly surge in preparation, with unready households dropping from 10.6% in November to 9.9% in December.

In the 56 local markets with metered measurements, Albuquerque is the most unprepared market with 13% of households still completely unprepared.  Tulsa (12.65%), Houston (12.41%), Dallas-Ft. Worth (11.71%), and Salt Lake City (10.63%) are the next four on the list.

Hartford-New Haven is the most prepared of Nielsen’s 56 metered markets — with only 2.6% of households still in need of a digital upgrade.

View complete data on digital preparedness in Nielsen’s 56 top local metered markets.

As the February 17, 2009 digital transition approaches, Nielsen will continue to track the readiness of TV households in the U.S. 

Readiness data are based on TV sets and households in Nielsen’s National People Meter panel, which is representative of U.S. television households, and Nielsen’s local metered panels, which are representative of their respective television household populations.

View the media alert.

Read coverage of Nielsen’s findings in The Wall Street Journal, Broadcasting & Cable, The Hollywood Reporter, Multichannel News and The Coloradoan.

The percentage of completely unready households declined from 8.4% in September 2008 to 7.7% last month — the largest single-month change in the past six months, according to Nielsen.

Non-Hispanic households continue to be more ready than their Hispanic counterparts.  But in recent months, both Hispanic and non-Hispanic households have hastened their preparations for the digital transition. 

As the February 17, 2009 digital transition approaches, Nielsen will continue to track the readiness of TV households in the U.S.  

Readiness data are based on TV sets and households in Nielsen’s National People Meter panel, which is representative of U.S. television households, and Nielsen’s local metered panels, which are representative of their respective television household populations.

View the full media alert.

Read coverage of Nielsen’s findings in Media Post, Multichannel News, and Broadcasting & Cable.

If the transition occurred today, those 9.6 million homes would unable to receive any television programming, while another 12.6 million households would have at least one television set that would no longer work.

In all, one in five U.S. households are either partially or completely unready for the government-mandated switch to digital programming that will occur on February 17, 2009.

Demographic Trends
Households headed by less educated, lower income, and blue collar workers are least prepared for the digital transition, according to Nielsen. Those whose total annual household income is less than $25,000 per year are five times more likely to be unprepared than households earning more than $75,000.

Older, white households are better prepared than their younger, African American, Asian, or Hispanic counterparts.  Thirteen percent of Hispanic households remain completely unready for the transition, as do 12.5% of African American households.

Geographic Trends
Among the 56 local markets Nielsen measures with electronic meters, Houston has the largest percentage (15.8%) of households that remain completely unready for the transition to digital TV.  In contrast, the Ft. Myers, Florida market, with only 2.4% of homes unready, is best prepared for the switch.

View complete data on digital preparedness in Nielsen’s 56 top local metered markets and 154 local diary markets.

Read Nielsen’s complete report on digital readiness in the U.S.

View the full press release.

Go behind the data: read NielsenWire’s Q&A with Steve McGowan, co-author of Nielsen’s most recent report on the transition to digital TV.

Read coverage of Nielsen’s findings on Bloomberg and in TV Week, Broadcasting & Cable, Multichannel News, Radio Business Report, and Mediaweek.

NielsenWire recently spoke with the co-author of Nielsen’s most recent report on the transition to digital TV, Steve McGowan, Senior Vice President, Insights and Client Research Initiatives, Nielsen.

NielsenWire: How has digital preparedness changed since Nielsen’s last report this past spring?

Steve McGowan:
Not all that much.  Since last May, when 9.8% of homes were “completely unready,” the number has dropped by just 1.4 percentage points — to 8.4%.

NielsenWire: So, how prepared are Americans for the switch to digital TV?

Steve McGowan:
The digital transition in American homes is happening at a casual rate: more than 9 million homes – that’s 8.4% of all U.S. homes – are still completely unready.

Spanish-language broadcast networks are still more vulnerable: 26% of tuning to these networks is done on “unready TV sets” — compared to 15% for English-language broadcast networks.

“Unready sets” are disproportionately found in the kitchen or secondary bedroom, as opposed to the living room or master bedroom, and may not get “upgraded” by February – or ever.

NielsenWire: Which demographics are most — and least — prepared for the transition to digital TV?

Steve McGowan:
Readiness rates are correlated with household income and head of household education.  Overall, we found that a larger proportion of “unready” homes are African American (12.5%) and Hispanic (13.0%).  Homes where Spanish is the primary language are most “unready” for the digital transition. 

Perhaps surprisingly to some, readiness rates are higher in older households.  Some might expect older people to be less ready for the digital transition, but in fact, they are better prepared, on average.

NielsenWire: What findings, if any, surprised you?

Steve McGowan:
With all the attention given to the coupon program for external digital tuner boxes, to date only one-fourth of the sets that were “upgraded” has one of these boxes.  As the transition date approaches, however, more homes may find this to be a better – and lower-cost — option than replacing the set altogether, or signing up for cable or satellite access.

NielsenWire: Why is this report still important?

Steve McGowan:
This series of reports tracks how Americans are responding to the conversion process.  Given the nation’s current economic turmoil, Americans may face additional financial hurdles in replacing or converting unready sets — we’ll be tracking that, as well.  As February 17 approaches, Nielsen will step up our reporting to better anticipate how viewing will be affected by the switch.

Get the latest data on digital readiness in the U.S.

Read Nielsen’s complete report on digital readiness in the U.S.

View complete data on digital preparedness in Nielsen’s 56 top local metered markets and 154 local diary markets.