The digital transmission of signals greatly increases the channel carrying capacity of the broadcast spectrum and provides scope for a substantial increase in the number of television channels transmitted terrestrially in each broadcasting market. A simple model of a hypothetical advertiser-supported television market shows that with increased channel numbers the average audience size for programmes and channels will decline, advertising revenue per channel will decline, programme costs per audience member will increase, and average profit per channel will decline. In practice, with digital terrestrial television the number of new channels licensed will continue to be subject to government regulatory decisions. But even with liberalisation of licensing policy, the economics of advertiser-supported television broadcasting will impose severe limitations on the number of new channels that any market can support. Digital interactive television services offer commercial broadcasters the prospect of a new source of revenue. The financial viability of these services, however, is not yet proven. Another unknown factor is the impact that personal video recorders will have on television advertising revenues. The transition from analogue to digital terrestrial transmission will have wide-ranging effects on commercial television viewing, but probably not on the structure and ownership of the television broadcasting industry.