May 06, 2002

Hard Drives a Money-Maker for Cable TV, Reports Leading Analyst Kagan Media Appraisals

Putting hard drives in cable TV set-top boxes is a money-maker for cable operators, according to a new report to be released later this month by analyst Kagan Media Appraisals titled "The Future of Local Data Storage in Set-top Boxes." Kagan's analysis shows that hard drive-enabled set-top boxes and the personalized services they make possible will give the cable industry increased revenue streams, greater customer retention (reduced churn), and lower infrastructure costs thanks to a more efficient use of limited bandwidth.

"The introduction of local storage connected to a two-way multimedia distribution network creates broad opportunities to add numerous services and the accompanying subscription fees," said Ian Olgeirson, senior analyst at Kagan World Media. "Cable Multiple System Operators (MSOs) that include PVR services will be among the early winners in the emerging video-on-demand and subscription video-on-demand markets. Other near-term possibilities range from audio services to enhanced advertising to gaming. Music is a killer application for adding revenue. Music service bundling opportunities alone can increase annual revenues by more than $100 per subscriber."

These new services will also reduce customer churn, enticing consumers to stay with their cable service provider, the report says. "In the digital cable market, customer turnover has reached alarming rates," said Larry Gerbrandt, chief content officer at Kagan World Media. "PVR is not only an application that television consumers want, but also provides an excellent tool to sort through the vast channel selection of digital cable. By introducing set-tops with PVR and other attractive features, cable operators can reduce churn by at least one percent, which would save nearly $500 million annually for every one million subscribers in service installation costs.

"Customers will increasingly store personal content such as photographs, home video and music collections on the hard drive in their cable set-top box — so they'll have a greater personal interest in the device itself. This can further reduce churn," added Gerbrandt.

As the cable industry looks to deploy Video On Demand (VOD) services more effectively, the Kagan report states that Personal Video Recorder (PVR) technology will pay for itself in reduced VOD infrastructure costs. "PVRs can provide a valuable complement to the deployment of VOD, and help limit strain on the system's capacity," said Gerbrandt. "Traditional VOD means delivering individual video streams to tens of thousands of households, requiring costly upgrades to cable operators' transport systems. Hard drives can serve as download destinations to offset bottlenecks at peak viewing hours and as temporary storage units to prevent clogs during frequent pausing or rewinding of movies-on-demand."

Seagate will provide the Kagan report to its cable industry customers to help them determine the right time to implement hard drive-based technology and services. Seagate is the number one supplier of hard drives for consumer electronics, and provides unique design and test services for the cable industry at its Design Service Center (DSC) for Consumer Electronics in Longmont, Colorado.

"Our development partners in the cable industry are making important decisions about when and how to deploy hard drives into consumers' homes," said Brian Dexheimer, Seagate executive vice president of Worldwide Sales, Marketing and Customer Service. "Seagate is investing our time to help our partners understand and act on the value proposition for local storage. We're also ready to help cable device makers test and implement their design plans at our Design Service Center for Consumer Electronics."

Seagate is the world's leading provider of storage technology for Internet, business and consumer applications. The Company's products include disc drives for the Enterprise, PCs and Consumer Electronics, as well as Storage Area Network (SAN) solutions. Seagate's market leadership is based on delivering award-winning products, customer support and reliability to meet the world's growing demand for information storage. Seagate can be found around the globe and at www.seagate.com.

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