June 15, 2007
An Interview with Bruce Leichtman: Part II of IV

Earlier today, we posted the first part of a four-part interview with Bruce Leichtman, head of Leichtman Research Group.

In October, I wrote about Leichtman's research. I wrote, "Interesting news regarding consumer behavior released this week, as the Leichtman Research Group examined the expansion of high-definition televisions not just across the total number of U.S. homes but rather WITHIN U.S. homes. The group found that getting an initial high-def. television set causes most families to want to buy another set."

I also wrote more recently about Bruce's TelevisionWeek quotes about wrestling not having as much potential to be a hit on HD because it has "more of a downscale appeal." I wrote about cultural biases and how they might be informing such a statement, but I wanted to dig deeper into what Bruce meant. In the process, we ended up discussing issues of active fans versus passive fans, and the importance of the differences between the two. In short, wrestling is massively popular and has a large core audience that consumes its product in multiple media formats, but it also has a more casual fan base that may watch the television show and nothing more.

Here is the second excerpt from this interview:

Sam: Back in October, some research that you release indicated that homes which purchase one HD set are more likely to then want more subsequent sets. Were you surprised by these findings?

Bruce: Some people mistakenly thought initially that HDTV sales indicated the number of homes who now have high-definition television sets. That's the advantage to being focused and doing surveys, though. I always marvel at the analysts who don't do research. I'm not saying that all quantitative research is pure, but how can you get at the number without surveying what people say. That's the mistake a lot of firms are making, thinking that one set equals one house.

We are finding more and more that this isn't true.  It makes sense that the people who can afford to buy HD sets buy more HD sets. High-definition is very high-end.  It is getting more mainstream, but it is still high-end, and those high-end homes are the ones that can afford a second and third television. They can afford multiple HD television sets much more so than some other homes can afford the first. We have been tracking this development for years, but what surprised me most was how rapidly those second-set homes grew up from 2005 to 2006.

Sam: Why do you suppose the average income of HD owners has raised as the sets become cheaper?

Bruce: When you see a result like this, you try and hypothesize why it happened. First, you make sure it was not a flaw in how you asked the question or phenomenon. My hypothesis when I see results like this is that high-definition sets are now becoming affordable beyond the early adopters among consumers who have money. In other words, these people were not craving an HD set like the traditional early adopter. They may not have been the first person on their street to get it, but now their neighbors have it, so they can afford it and get one, too.  

We got the same phenomenon from DVRs as well last year. Why did the average income of DVR homes go up? Another answer is that not all consumer adoption is solely about consumer behavior. Why did DVR income go up? Well, Comcast bundled DVRs with their HD service.  By putting HD and DVRs together, they had DVRs riding on the back of high-income HD homes. Not everything is all about consumer adoption, but it's also about choices from both providers and consumers that led to that adoption.

Sam: I wrote about World Wrestling Entertainment's move to HD and the TelevisionWeek story in which you said that a move to HD might not benefit WWE's fan base because the product has "more of a downscale appeal." What was meant by that, and what research were you basing it on?

Bruce: Using rounded numbers, about a quarter of American homes have high-definition sets today. When you look at that quarter, it generally skews higher income. Something like wrestling skews, generally, lower income. That doesn't mean that there aren't doctors and lawyers who enjoy wrestling, but, like with anything else, you have to look at the mean and aggregate where the product stands. I have based this on research I've seen. The hypothesis is that, even though it is sports and sports fans skew a little higher toward HD, wrestling probably indexes a little bit below average when it comes to income. I'm not saying it's tremendously low, but it seems to register lower than other interests.

Sam: WWE's Gary Davis countered in that article by pointing to WWE's success in PPV, DVD, online video, and a variety of other platforms and the amount of money the more ardent WWE fans spend on the product. Do you think the disparity between WWE's claims and yours is a difference between looking at casual fans and more dedicated fans?

Bruce: I think wrestling fans are a great example of intensity. There are television shows that people watch, but there is not necessarily an intense appeal. Those who follow wrestling closely are often more intense in their desire for the product. I think that's very true with sports in general, and that's why sports are so appealing to advertisers. It is not a passive relationship between the content and the viewers.

That intensity correlates into a willingness to shell out money to watch this type of programming on-demand or on PPV. Does that same intensity correlate into going to get an HD TV set? If they do end up running out to get HD, it is more than likely surrounding a sports relationship in general rather than anything that is specific to wrestling.

You just have to be careful to not overstate your case when doing research and to let the numbers guide you if the research was conducted correctly. For instance, I have often said that the male is the driver of HD sets, but women do watch HD and are important parts of the decision to get an HD set, and it's important to keep that in mind.