Here's why: HDMI connections allow for the use of a copy protection technology called HDCP (High-bandwidth Digital Copy Protection). Many content providers, including popular channels like HBO and Showtime use the industry-standard HDCP to curtail illicit use of their content. When content is HDCP-protected, it can't be placeshifted.
To ensure that you can watch your TV anywhere at any time, we recommend that you configure a Component or Composite input in addition to HDMI. These connection types do not have HDCP restrictions. And component connections enable the same HD streaming resolutions and picture quality when you're using SlingPlayer to watch your content! This is what the Quick Start Guide suggests, too, so check that out if you haven't already - it's included in the Slingbox 500 retail box.
If you want to connect your component or composite cables to different video sources, please be aware that you may be prevented from viewing all of your HDMI content at any time. Check out the short video linked below entitled "HDMI, your Slingbox & you", which explains these concepts in greater detail!
What is Selectable Output Control?
A very limited number set-top boxes and video sources use yet another layer of copy-protection called Selectable Output Control, or SOC. Used in devices where both HDMI and analog outputs (component, composite, etc.) are available, SOC disables any analog outputs when HDMI is also hooked up.
Does the video over component go "dark" when you attach an HDMI cable to your set-top box? Then you likely have an SOC-capable set-top box. Currently, there are only a handful of SOC capable set-top boxes on the market.
To enable your Slingbox 500 to placeshift HD content with an SOC (Selectable Output Control) capable set-top box, make sure that you have component cables connected to and from the Slingbox 500, and configure your Slingbox 500 to use component only. Doing this does not affect picture quality. You can still watch your HD content anywhere.