Sinclair Envisions ATSC 3.0 Royalty Windfall

Sinclair Broadcast Group CEO David Smith has high hopes for ATSC 3.0, not only as a new, more capable broadcasting system, but also as a source of revenue from the technology it has contributed to the standard through its OneMedia R&D unit.

The intellectual property “opportunity is fairly straightforward,” Smith said on a call with securities analysts following the release of fourth quarter earnings this morning. “We own it; it’s ours.”

Once the standard is finalized by the ATSC, authorized by the FCC and put to work, he suggested that Sinclair would be entitled to royalties for every TV set sold in the United States, probably the rest of North America and South America, likely South Korea and possibly even Europe.

“It’s possible that it becomes the global standard,” he said.

“How do you subscribe value to that? We are not even going to try. But you should assume that anybody who is going to watch television, whether it is on virtual reality devices, cars, machines, phones, pads, TV sets is going to [be using] our technology.”

For Sinclair, any royalties would represent a return on the investment it has made in OneMedia. According to Lucy Rutishauser, SVP, corporate finance and treasurer, that investment amounted to $12 million in 2015 alone.

ATSC 3.0 is “advancing very quickly now,” Smith said. ATSC will soon finalize the standard. After that, he said, the industry will petition the FCC to permit its use.

Then, it’s just a matter of the top station groups getting together and implementing it. With consolidation, that is not as tough today as it would have been several years ago, he said.

In the meantime, Sinclair will be active in heralding the new standard. It is planning a demonstration of what the “future world” will look like with ATSC 3.0 enhanced by a single frequency network in Baltimore and Washington, the two adjacent markets where Sinclair owns stations.

Single frequency networks — multiple transmitters broadcasting the same programming — is key to the ATSC 3.0 rollout, insuring blanket coverage of markets.

Sinclair will also be involved in “full-blown” demos at the NAB Show in April and will host a “plug and play” where manufacturers of TV gear and receivers “get in a room and start comparing notes and making sure that their equipment is interfacing and does everything that it is supposed to do.”

Said Sinclair CFO Chris Ripley: “Our expectations and conviction around ATSC 3 has been quite high and [they will] only be getting higher.”