Struggle for subscribers will add cost to TV services. (Media & Technology).

Watch your wallet. In a race to gain market share, the rival cable- and satellite-television industries are going to offer nifty ways to customize TV viewing. The betting is that you'll pay more for personalized television, which means selecting programs to view at your convenience.

Already, the satellite TV industry promotes digital video recorders, which can store 40 to 400 hours of programming on a hard disc drive instead of tape, to be summoned at your leisure. EchoStar Communications Inc., the No. 2 satellite TV company, says it has shipped more than 400,000 such devices.

To counterattack, the cable industry finally is rolling out the video-on-demand service promised for two decades, capitalizing on cable's two-way capability. Using a remote control, subscribers can select from hundreds of programs to rent.

Cable TV operators are nervously testing or tweaking their VOD offerings, because so much rides on consumer acceptance. Video-on-demand is supposed to be a killer application for costly digital cable service. Most cable customers still subscribe to traditional analog service, but digital cable is a prerequisite for video on demand.

If cable operators botch the VOD rollout, there will be hell to pay with investors who helped bankroll the industry's $50 billion upgrade to digital cable.

No one anticipated this moment more shrewdly than John Sie, founder and chairman of Liberty Media Corp.'s Starz Encore Group, which operates 15 pay TV channels in the U.S. Almost three years ago, Sie dreamed up a way to protect and enhance his subscription pay TV business in an on-demand environment. Sie pioneered the idea of subscription VOD, arguing that consumers would rather pay a flat monthly fee instead of a per-use charge to summon programming at will.

Betting on this premise, Sie struck exclusive long-term deals with Walt Disney Co. and several other Hollywood studios for the right to make their movies available on demand to subscribers anytime during the period that Starz Encore airs the movies on its pay TV channels.

The Starz Encore chairman recently warned cable TV executives that they have just 12 to 18 months to boost their share of the digital TV business, or risk losing ground permanently to the rival satellite TV industry, which is 100 percent digital. The satellite TV industry added 2.5 million subscribers in 2001, while cable TV growth was virtually flat.

Sie, projecting that 80 percent of the nation's subscriber TV households will opt for digital television by the end of the decade, said cable operators would fall behind if they nab only 50 percent of digital TV customers. To maintain or increase its base, the cable industry needs to capture 68 percent as the total number of subscriber TV households climbs to a projected 111 million homes by 2010.

If cable operators sign up just half of the new digital households, the industry's subscriber count will fall by 8 million, Sie said at a recent Los Angeles conference.

The Starz Encore chairman urged cable executives to forge ahead while EchoStar and its larger competitor, Hughes Electronics Corp., are preoccupied in Washington, seeking regulatory approval for their proposed merger.

"Whether it happens or not, they're going to come back with a vengeance. And probably in two or three years, when cable enters telephony against the (regional bell operating company), which is the only remaining monopoly, the RBOCs will retaliate as well. And when you add the advances of streaming video on the Internet, that's going to add another factor' Sie said. "So cable can't just sit around and figure out, 'How am I going to do VOD.'"

Comcast Corp., set to become the nation's largest cable TV operator if it completes its pending acquisition of AT&T Corp.'s cable division--says it's marketing video-on-demand service to 600,000 of its digital cable customers, and expects to double that number by year-end.

"The one thing that we should not do is to 'transact' the customer to death," said David Watson, Comcast's executive vice president of sales, marketing and customer service.