Satellite is rapidly luring in cable TV¿s best, highest-paying subscribers. But according to a new report that will be debuted today at Cable 2002 in New Orleans, Forrester Research, Inc. (Nasdaq: FORR) predicts that cable can fight back and win. The report suggests that cable operators expand their video-on-demand (VOD) content, improve programming interfaces, and offer entertainment gateways that deliver entertainment throughout the home.

“Nearly two-thirds of new satellite subscribers had cable last year, and 22 percent report that they had digital cable before shifting to the dish. Digital cable isn¿t sticking,” said Josh Bernoff, principal analyst at Forrester. “But in the next five years, we believe that cable will take three tries at winning back satellite subscribers and ultimately will triumph.”

The first step for cable TV is to add broad collections of VOD content to its digital cable product. To fight the threat of satellite personal video recorders (PVRs), cable must respond with not just movies but also broad subscription VOD collections with programs from Discovery, Lifetime, ESPN, and NBC — all for one low price.

The second step toward reversing satellite growth is to focus on improving the on-demand interface, which will become the key to creating customer satisfaction and driving traffic to VOD and information screens. Operators must simplify the path to on-demand information and video choices by offering quick access to frequently used features, flexible searches, and intelligence about subscribers. Such interfaces will end satellite growth by 2004.

The final step in winning back satellite customers is to offer an entertainment gateway — a next-generation set-top box with a hard drive and a full-time broadband connection. This entertainment gateway will enable cable operators to offer new, revenue-generating services, including music downloads and games, content sharing, and videoconferencing.

“As a result of these efforts made by the industry, satellite will be in decline by 2005,” added Bernoff.

To conduct this research, Forrester interviewed key executives from seven of the nine top cable operators in the US and both satellite operators. Forrester has also published a brief on the Canadian cable market, “On-Demand TV In Canada: Later, But Better,” also available today.

Bernoff will present findings of this report at a Cable 2002 press conference at 12:30 p.m. today.