Moving to ATSC 3.0 does not strike me as prohibitively expensive, except, perhaps, in the smallest TV markets where they may still be waiting to upgrade to HD in the newsroom. And there are ways to mitigate the expense. But in the long run, the myriad financial benefits from the new standard should be evident to those broadcasters who intend to stay in business for the foreseeable future.
The future of free TV will not be free.
To be part of the next-generation of broadcasting, broadcaster will have to adopt and implement the next-generation standard, ATSC 3.0. And that will involve some expense.
How great an expense?
A study by the consulting firm Meintel, Sgrignoli & Wallace commissioned by the Pearl consortium of major station groups says it will be between $300,000 and $600,000 per station. That would, the study says, cover a new exciter and mask filter, studio-to-transmitter link modifications, test equipment, audio and video encoders, schedulers and the installation of it all.
To take full advantage of ATSC 3.0 — that is, to insure that signals reach mobile devices and the those old sets in the basement and to allow zoned advertising — it will also be necessary for broadcasters to establish secondary stations in their markets to relay signals.
These single frequency networks (SFNs) — so-called because the stations would all operate on the same channel — could cost a few million dollars per market, according to one cost analysis.
Broadcasters would also have to foot the bill in each market of operating a transition station. Such stations would continue to simulcast in SD all the stations using the current digital standard for the sake of those now watching off air and not eager to rush out and buy new sets with ATSC 3.0 tuners. ATSC 3.0, in case you don’t know, is not backwards compatible.
In most markets, setting up the transition stations would not be particularly dear. But in large markets like New York and Los Angeles where spectrum is at a premium, securing or setting aside a channel for the transition could be pricey.
I have yet to see any cost estimates on the transition stations.
Despite that unknown and potentially substantial variable, ATSC 3.0 does not strike me as prohibitively expensive, except, perhaps, in the smallest TV markets where they may still be waiting to upgrade to HD in the newsroom.
And there are ways to mitigate the expense. After the incentive auction, the government is going to reimburse broadcasters up to $1.75 billion to cover the costs of moving to new channels in the repacking of the TV band. If ATSC 3.0 proponents can persuade the FCC to sync up the rollout of ATSC 3.0 with the repacking, the reimbursement money may help defray the cost of ATSC 3.0.
Broadcasters can also cut the cost of the SFNs. Broadcasters in a market could get together to share the cost and the facilities. Individually or collectively, they could also avoid the big capital outlay by leasing the facilities from a third party. Keep in mind, too, that SFNs are optional.
On a macro level, ATSC 3.0 appears to be well within financial bounds. Let’s be conservative and say that 1,000 post-auction stations pay an average of $500,000 each to gear up for ATSC 3.0. That’s $500 million. And then let’s say, broadcasters spend an average of $3 million in each of the top 100 markets for single frequency networks. That’s another $300 million.
Excluding the cost of the transition stations, ATSC 3.0 implementation amounts to an investment of $800 million for an industry that takes in more than $20 billion a year. Call ATSC 3.0 the 4% solution.
So why do I hear muttering from some about the expense of ATSC 3.0, about how they can’t make the ROI work.
I get this coming from small-market stations that are not part of a big group. For them even $300,000, the lower end of the cost estimates, is daunting.
But I’ve also heard kvetching about cost from the network O&O groups, the most lucrative in the business. Each has spot revenue in excess of $1 billion.
I suspect that CBS is going to dump as many of its duopoly stations and standalone CW affiliates in the incentive auction as it can. That means it could be left with as few as 16 stations. Upgrading them would cost just $8 million before repack reimbursement offsets. Note that the CBS station group enjoyed spot revenue of $1.6 billion in 2014, according to BIA/Kelsey.
Frankly, the networks objections to ATSC 3.0 go much deeper than the implementation cost. More programmers than broadcasters, they don’t like the idea of giving away TV for free anymore. But whining about cost is an easy way for them to dismiss the whole thing.
I’ve been a champion of ATSC 3.0 for years now so I won’t go into a long discussion of why broadcasters — at least those who intend to stay in the business for a while — have to embrace it. But I will give you the top bullet points.
With ATSC 3.0, broadcasters will be able to:
- Broadcast 4K and other advanced TV formats
- Broadcast to fixed sets with set-top antennas in most places
- Broadcast directly to smartphones and tablets
- Provide zoned programming and advertising within markets
- Provide datacasting services to third parties
- Lease excess capacity to other service providers
No, free TV of the future will not be free, but it’s a bargain that will pay dividends for generations to come.