A change in television broadcast standards coming later this year was expected to boost sales of cutting-edge flat-screen televisions and high-end cable TV packages. Instead, it's spurring sales of more modest products, like RCA Corp.'s $60 converter box.

Between August and November, sales of converter boxes, which change digital signals to analog ones, have jumped nearly 50% as consumers scramble to insure they can watch their favorite shows after the changeover on Feb. 17, according to data from The Nielsen Company, which tracks consumer TV behavior and spending.

The increase in box sales underscores the impact the worst recession in decades is taking on the consumer electronics industry. Before a crisis in the financial sector spread to the economy last year, many observers had expected strong sales of flat-screen televisions, like Sony Corp.'s (SNE) Bravia series of liquid crystal display TVs, and advanced cable packages, like Comcast Corp.'s (CMCSA) $80 per month Digital Premier package, as consumers geared up for the change. The broadcasting change will allow for clearer signals and significantly increase free programming.

Instead, consumers are looking for cheaper solutions as they tighten their belts. They've turned to simple boxes, like RCA's or Magnavox's $50 box, so that they can continue watching television without buying new TV sets. Some observers fear the rush might even stress a government program offering subsidies for converter boxes.

"People are cutting back on their consumer discretionary spending," said Justin Nielson, senior analyst, SNL Kagan in Charlottesville, Va., who has been tracking consumers making the transition. "Most of the remaining over-the-air TV viewers are now going just to converter boxes."

The growing popularity of budget fixes has curbed prospects for companies from Comcast to digital video recorder provider Tivo Inc. (TIVO). Analysts had expected as many as half of the roughly 22 million households affected by the change to buy cable or satellite TV packages. Another third was expected to buy high-definition televisions.

Those hopes have faded.

According to a November survey by Nielsen, 38.3% of consumers were planning on buying a converter box rather than a more substantial product to cope with the transition. That was markedly higher than an August survey that showed 25% were opting for the cheaper alternatives.

The slow uptake has weighed on expectations for sales growth of new televisions. DisplaySearch, a research firm, says it now expects the transition will spur only a 2% lift in TV sales, down from expectations of about 10% earlier this year. Revenue from television sales will likely drop 18% from last year to $88 billion in 2009.

The pain will likely be felt by cable and satellite television providers, many of which were aggressive in trying to woo new subscribers. For example, Comcast Corp., whose territory services millions of households making the transition, began offering in October free service for a year in an effort to win over early converts.

"We see a real opportunity to target and attract new customers," Comcast Chief Operating Officer Steve Burke said in an Oct. 29 call to discuss the company's earnings. A Comcast spokesman had no comment on current sales.

Analysts say the big gains that service providers had hoped for are unlikely to materialize. Ben Piper, an analyst at research firm Strategy Analytics, said service providers will likely get about a third of the subscribers they initially expected.

Just 10% of consumers will opt for pay television to deal with the transition, according to SNL Kagan.

Companies providing movie rentals and video recording services might also see their prospects fade. Companies such as Netflix Inc. (NFLX) and Tivo had hoped more consumers would start using their services when they bought new televisions or subscribed to new cable packages.

"We do realize wallets nowadays won't let people get into satellite" and other expensive pay-TV services, said Francie Bauer, a spokeswoman for DISH Network Corp (DISH). "But we have hope down the road."

-By Ben Charny, Dow Jones Newswires; 415-765-8230; ben.charny@dowjones.com

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